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23 votes

Are financial markets "unique" for each "currency pair", or are they simply "translated"?

It's not clear what level of answer you're looking for, so here is a much more basic answer. There are indeed many exchanges with many different prices. However, if you have noticed that you could ...
Patrick Stevens's user avatar
8 votes

Are financial markets "unique" for each "currency pair", or are they simply "translated"?

Economic analysis always requires making some assumptions at some point. The assumptions that you make should try to fit reality the best that they can. Regarding your specific situation, there is a ...
jmbejara's user avatar
  • 9,355
6 votes

Who is losing in an arbitrage?

Nobody has to loose in an arbitrage. Economic relationships are not necessarily zero-sum (in fact often they will not be zero-sum). For example, if apples in city A are sold for ${\\\$}5$ and apples ...
1muflon1's user avatar
  • 56.4k
6 votes
Accepted

Are no arbitrage models and equilibrium models equivalent?

...no-arbitrage models (such as Black-Scholes and HJM) are equivalent to equilibrium models (such as CAPM or C-CAPM). Short Answer Yes, for models where asset prices are assumed to be Ito ...
Michael's user avatar
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5 votes
Accepted

Properties of Financial Markets in Real Life

Equilibria: in the macroeconomic sense of aggregate equilibrium where all markets clear, markets are most likely never in any equilibrium but rather in constant flux between different equilibria, ...
1muflon1's user avatar
  • 56.4k
5 votes

Who is losing in an arbitrage?

It's important to distinguish between the effects of arbitrage on: a) the direct parties to arbitrage transactions; b) other agents in the markets in which the arbitrage takes place. Suppose ...
Adam Bailey's user avatar
  • 8,369
5 votes

No arbitrage arguments on production machine in a neoclassical model

The no-arbitrage condition simply states that the (rental) price of the machine should equal it's net cost. So, there are no profits, i.e. I am indifferent between renting or not. If the price is ...
BB King's user avatar
  • 6,148
3 votes

No arbitrage arguments on production machine in a neoclassical model

Given no arbitrage, the price of the machine of vintage $\tau$ should be $q_{k t}(\tau)=p_{k t}(\tau)-\frac{p_{k t+1}(\tau)}{1+r_{t+1}}$... "No arbitrage" is a bit of a misnomer here. In ...
Michael's user avatar
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3 votes

How often (if ever) do currency exchange cross rates differ from actual rates?

Where? Retail, interbank, airport vendors... Generally prices are never identical. There is no no such thing as the FX price. There will always be a bid ask spread and every market maker or platform ...
AKdemy's user avatar
  • 4,122
2 votes

Arbitrage free implies complete market in general binomial model?

Here is a simple fact: In your notation, the model under consideration is complete if and only if the matrix \begin{bmatrix} 1+R & 1+R \\ d & u \end{bmatrix} is one-to-one, i.e. $d \neq u$. ...
Michael's user avatar
  • 2,619
2 votes

How does Egypt prevent people from arbitraging their currency?

Used to be capital controls. You could only buy dollars (or any other foreign currency) through official channels at the official favorable rates by providing documentation displaying need for said ...
tvbc's user avatar
  • 114
2 votes

What's wrong with have a 'one second tick' on stock market trades, to prevent high frequency trading?

There is nothing wrong with your idea. Some people may say that it would reduce liquidity - but there is way more than enough liquidity in the system already. HFT is just parasitical - it serves no ...
Mick's user avatar
  • 1,046
1 vote
Accepted

Price discrepancy between the same company's stock on two exchanges

Equinor is a cross listing which means the shares will be the same and it is the same legal entity. Prices should align in this case, unlike dual listings like Royal Dutch Shell (in the early 1980s, ...
AKdemy's user avatar
  • 4,122
1 vote

How would one arbitrage a mispricing in interest rates and forex rates?

You can have a look at the wikipedia article about covered interest rate parity. Any deviation is an arbirtage opportunity. In your case, $${{S_{t}}}\frac {(1+i_{\ ¥})}{(1+i_{\\\$})} = F_{t+k}$$ If ...
AKdemy's user avatar
  • 4,122
1 vote
Accepted

Is dual pricing, arbitrage?

Dual/discriminatory pricing is not arbitrage. At most you could say that dual pricing sometimes creates arbitrage opportunities. In situations where the goods/assets are tradeable without any friction,...
Giskard's user avatar
  • 29.5k
1 vote

$E[F_T] = F_0$ implies $p = \frac{1-d}{u-d}$? or is implied by?

I have limited knowledge of financial econ, so excuse me if I miss the ball completely. The no-arbitrage condition implies that the value of an asset should be a weighted sum of the payoffs of the ...
tdm's user avatar
  • 12k
1 vote

Are financial markets "unique" for each "currency pair", or are they simply "translated"?

A quote would be on an exchange, and currency involved is whatever is specified on the exchange. There may be multiple exchanges - with different prices. (Price deviations between markets for ...
Brian Romanchuk's user avatar
1 vote

Why would option chains' IV differ, for the same stock and expiration?

With illiquid stocks, the B/A spreads for the options are Holland tunnel wide. For some it's maybe 50 cents, for others, over $4. With such a wide range of price, where is the actual market? What's ...
Bob Baerker's user avatar
1 vote

How do takeover deals create arbitrage opportunities that involve necessarily selling short the acquirer’s stock?

In simple terms, an acquisition usually happens when a successful (read: low-risk) company purchases an unsuccessful (read: high-risk) company. It can be viewed as a transference of risk from the ...
heh's user avatar
  • 1,808
1 vote
Accepted

What happens when a subsidiary distributes its shares to its parent company?

The argument to have both share values converging is based on the fact that when the subsidiary redistributes the shares to the parent is similar to "unspining off". The spin-off subsidiary is ...
JoaoBotelho's user avatar
  • 2,155

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