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This paper sets forth the foundations for a transactional approach for the performance of arbitrage in foreign exchange … markets. Firstly, we review both the standard model of financial arbitrage and the so-called covered-interest arbitrage … expand on its main tools of analysis, namely differential rates, residual information sets, arbitrage gaps and transaction …
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Brazilian Foreign Exchange (FX) markets have a unique structure: most trades are conducted in the derivatives (futures) market. We study price discovery in the FX markets in Brazil and indicate which market (spot or futures) adjusts more quickly to the arrival of new information. We find that...
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