Hostname: page-component-586b7cd67f-t8hqh Total loading time: 0 Render date: 2024-11-24T22:36:11.755Z Has data issue: false hasContentIssue false
  • English
  • Français

Graph Theoretic Approaches to Foreign Exchange Operations

Published online by Cambridge University Press:  06 April 2009

N. Christofides ,
R. D. Hewins  and
G. R. Salkin
Get access Rights & Permissions [Opens in a new window]

Extract

Trading in currencies in order to obtain the best possible exchange rate is known as arbitrage and can broadly be divided into three categories:

1) Space Arbitrage––transactions to take advantage of discrepancies between rates quoted at the same time in different markets.

2) Time Arbitrage––transactions to take advantage of discrepancies between forward margins for different maturities.

3) Interest Arbitrage––transactions to take advantage of discrepancies between yield on short-term investments in different currencies. This form of arbitrage can be split into (a) Covered and (b) Uncovered (speculative) interest arbitrage. The former variety uses today's forward rate for forward conversion back into our holding currency; the latter allows the dealer to use the spot rate existing in the future.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 14 , Issue 3 , September 1979 , pp. 481 - 500
Copyright
Copyright © School of Business Administration, University of Washington 1979

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

REFERENCES

[1]Aliber, R. Z. “The International Market for Foreign Exchange.” New York: Praeger (1969).Google Scholar
[2]Christofides, N. “Graph Theory––An Algorithmic Approach.” New York: Academic Press (1975).Google Scholar
[3]Cutler, D. “The Valuation of the SDR.” Euromoney(08 1974), pp. 27–31.Google Scholar
[4]Einzig, P. “The Euro–Dollar System.” New York: MacMillan (1966).Google Scholar
[5]Einzig, P. “A Textbook on Foreign Exchange.” New York: MacMillan (1969).Google Scholar
[6]Farbey, B. A.; Land, A. H.; and Murchland, J. P.. “The Cascade Algorithm for Finding All Shortest Distances in a Directed Graph.” Management Science, Vol. 14, No. 1 (09 1967), pp. 16–28.Google Scholar
[7]Harrod, R. “Reforming the World's Money.” New York: MacMillan (1965).CrossRefGoogle Scholar
[8]Hewins, R. D. “Management Science Models for Foreign Exchange.” Ph.D. Thesis, Imperial College, London (1978).Google Scholar
[9]Hu, T. C. “Revised Matrix Algorithm for Shortest Paths.” S.I.A.M. Journal of Applied Mathematics, Vol. 15, No. 1 (01 1967), pp. 207–218.Google Scholar