Munich Personal RePEc Archive

Arbitrage Opportunities: Anatomy and Remediation

Peter, Bossaerts and Jason, Shachat and Kuangli, Xie (2018): Arbitrage Opportunities: Anatomy and Remediation.

There is a more recent version of this item available.
[thumbnail of MPRA_paper_87273.pdf]

Download (1MB) | Preview


We introduce an experimental design where arbitrage opportunities emerge reliably and repeatedly. We observe significantly higher sell-side than buy-side arbitrage opportunities. We study ways to mitigate them. Relaxing margin requirements, shortsale restrictions, or both have neither statistically nor economically significant effects. Increasing competition (more participants, each with small stakes), and more impactful, participants’ stakes (few wealthy participants each with large exposures), generate large reductions in arbitrage opportunities. Hence, we advocate increased competition for small markets, and allowance for large stakes in large markets, rather than relaxation of rules on margin purchases or shortsales.

Available Versions of this Item

Atom RSS 1.0 RSS 2.0

Contact us: mpra@ub.uni-muenchen.de

This repository has been built using EPrints software.

MPRA is a RePEc service hosted by Logo of the University Library LMU Munich.