verry good strange arbitrage strategy

Discussion in 'Strategy Development' started by chaos_trader, Apr 6, 2006.

  1. I found this in french language please can you help to undersand


    We present you 2 diagrams that illustrate the spreads tonight between the even Eur Usd and Gpb Usd and Eur Usd and Jpy Usd at 22 o'clock

    On the Usd Eur quoted 1.3018
    We would have a Jpy Usd quoted in the Eur basis Usd 1.2932
    the difference is therefore of 86 pips

    On the Usd Jpy quoted 104.37
    We would have an Eur Usd quoted in the Jpy basis Usd 103.32
    the difference is therefore of 105 pips

    On the Usd Eur quoted 1.3018
    We would have a Gpb Usd quoted in the Eur basis Usd 1.3118
    the difference is therefore of 100 pips

    On the Usd Gpb quoted 1.8966
    We would have an Eur Usd quoted in the Gpb basis Usd 1.8848
    the difference is therefore of 118 pips


    In some days these differences can come back or even to zero to reverse itself/themselves.

    Some shrewd kids must conduct this type of arbitration systematically without big risks


    http://www.hyper-forex.com/forum/read.php?f=1&i=171&t=170
     
  2. 'verry' good strange arbitrage strategy

    'verry' good :confused:

    If you care to read the further posts in the given forum url, you will find out that many posters question this. Further, the calculation seems to be very obscure. Several forum posters pointed this out.

    It seems that the whole thing is a plug for a commercial training outfit.

    nononsense
     
  3. MTE

    MTE

    The idea described is called triangular arbitrage, where you use 2 pairs and a cross rate between the two currencies in the pairs.

    For example,

    EUR/USD, JPY/USD and EUR/JPY.

    You can calculate the implied EUR/JPY cross-rate from the other two pairs and then compare it to the actual EUR/JPY rate. If there's disparity then there is a arbitrage profit to be made.

    The same principle applies to 4-way arbitrage.

    I doubt it is a viable strategy as it the most basic relationship in FX market, which means that it holds all the time.