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dc.contributor.authorAkram, Q. Farooq
dc.contributor.authorRime, Dagfinn
dc.contributor.authorSarno, Lucio
dc.description.abstractThis paper provides real-time evidence on the frequency, size and duration of arbitrage opportunities and deviations from the law of one price (LOP) in the foreign exchange market. We investigate deviations from the covered interest rate parity (CIP) condition (‘round-trip arbitrage’) and inter-market price differentials (‘one-way arbitrage’) using a unique data set for three major capital and foreign exchange markets that covers a period of more than seven months at tick frequency. The analysis unveils that: i) numerous short-lived violations of CIP and the LOP arise; ii) the size of CIP violations can be economically significant across exchange rates; iii) their duration is, on average, high enough to allow agents to exploit them, but low enough to explain why such opportunities have gone undetected in much previous research using data at lower frequency.nb_NO
dc.publisherNorges Banknb_NO
dc.relation.ispartofseriesWorking Papers;12/2005
dc.rightsAttribution-NonCommercial-NoDerivatives 4.0 Internasjonal*
dc.subjectJEL: F31nb_NO
dc.subjectJEL: F41nb_NO
dc.subjectJEL: G14nb_NO
dc.subjectJEL: G15nb_NO
dc.subjectexchange ratesnb_NO
dc.subjectcovered interest rate paritynb_NO
dc.subjectforeign exchange microstructurenb_NO
dc.titleArbitrage in the Foreign Exchange Market: Turning on the Microscopenb_NO
dc.typeWorking papernb_NO
dc.subject.nsiVDP::Samfunnsvitenskap: 200::Økonomi: 210::Samfunnsøkonomi: 212nb_NO

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Attribution-NonCommercial-NoDerivatives 4.0 Internasjonal
Except where otherwise noted, this item's license is described as Attribution-NonCommercial-NoDerivatives 4.0 Internasjonal