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A microscopic model of triangular arbitrage

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  • Aiba, Yukihiro
  • Hatano, Naomichi

Abstract

We introduce a microscopic model which describes the dynamics of each dealer in multiple foreign exchange markets, taking account of the triangular arbitrage transaction. The model reproduces the interaction among the markets well. We explore the relation between the parameters of the present microscopic model and the spring constant of a macroscopic model that we proposed previously.

Suggested Citation

  • Aiba, Yukihiro & Hatano, Naomichi, 2006. "A microscopic model of triangular arbitrage," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 371(2), pages 572-584.
    • Handle: RePEc:eee:phsmap:v:371:y:2006:i:2:p:572-584
    DOI: 10.1016/j.physa.2006.05.046
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    References listed on IDEAS

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    1. Mantegna,Rosario N. & Stanley,H. Eugene, 2007. "Introduction to Econophysics," Cambridge Books, Cambridge University Press, number 9780521039871, September.
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    Cited by:

    1. Takatoshi Ito & Kenta Yamada & Misako Takayasu & Hideki Takayasu, 2012. "Free Lunch! Arbitrage Opportunities in the Foreign Exchange Markets," NBER Working Papers 18541, National Bureau of Economic Research, Inc.
    2. Alberto Ciacci & Takumi Sueshige & Hideki Takayasu & Kim Christensen & Misako Takayasu, 2020. "The microscopic relationships between triangular arbitrage and cross-currency correlations in a simple agent based model of foreign exchange markets," PLOS ONE, Public Library of Science, vol. 15(6), pages 1-19, June.
    3. Zura Kakushadze & Juan Andrés Serur, 2018. "151 Trading Strategies," Springer Books, Springer, number 978-3-030-02792-6, December.

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