Topic:  Exploitable Arbitrage Opportunities Exist in the Foreign Exchange Market

Presenter：Martin Young, Associate Professor，Head, Department of Finance, Banking and Property, Massey University, New Zealand

Time:  November 27, 2007（Tuesday）9：00—10：30 AM    

Venue:  Room 513, Jiageng Bld 2

Chair： Yujun Wu, assistant professor in finance, IFAS

Abstract：

We provide some of the first empirical evidence of the compensation required by arbitrageurs to collect information on which to trade.  The Grossman and Stiglitz (1976, 1980) propositions regarding this have previously gone untested due to the inability to control for pervasive impediments to arbitrage. Using binding quotes from the highly liquid spot foreign exchange market we find mean triangular arbitrage opportunities ranging from 2.0 to 3.8 basis points across seven major currency pairs. Well documented impediments to arbitrage do not explain the profits on offer so we conclude they are in fact compensation to arbitrageurs for providing liquidity.

Presenter Introduction：

Dr Martin Young is an Associate Professor of Finance in and Head of the Department of Finance, Banking and Property, Massey University, New Zealand. Prior to this he spent four years as a Senior Fellow at the Nanyang Business School, Nanyang Technological University in Singapore. As well as his academic experience, Dr Young also has wide experience working within financial markets, having been a member of the New Zealand Stock Exchange for many years. He has a particular interest in research in the Asian financial markets, is a member of the Asian Finance Association Board, and is the New Zealand representative on the Asian Shadow Financial Regulatory Committee. Recently he was the co-program chair for the Asian FA/FMA conference held in Auckland, New Zealand. His academic publications include articles in the Journal of Banking and Finance, the Financial Review and the Pacific-Basin Finance Journal and he currently serves on the editorial board of the International Review of Financial Analysis.

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