Here is the setup: one period binomial model The market has three assets: bank account $B$ , asset $S$ , and asset $K$ $r = 0$ , so payoff for asset invested at bank at any $t$ is $1$ $S_0 = 100, S_u = 120$ and $S_d = 80.$ $K_0 = 10, K_u = 15$ and $K_d = 5$ Lets say $K_u$ is different and I want to find a type 1 (type A) arbitrage . How can I do this? I know that there are certain conditions for …
By Stephen Hope As traders, we of course need money to make money, but not everyone has 10-50k of capital lying around to start one's trading journey. Perhaps the starting capital is only 1k or less. This article describes how one can take a small amount of capital and multiply it as much as 10 fold in one year by taking advantage of large market inefficiencies (leading to arbitrage opportunities…
I’m looking to put together a small crew to take on a large arbitrage project. The (rough) model for this would be “Hong Kong Syndicate” which took on the horse betting market. To be involved you have to be willing to make a large commitment in terms of time or money (I plan to contribute both). […]
A reader of my article “ An arbitrage trade between energy stocks and futures ” suggested that I should look at a longer history of crude oil prices vs. XLE. So I performed the same cointegration analysis for the front-month crude oil futures contract CL vs. XLE since December 1998. (I use CL instead of QM, the mini crude oil contract, due to its longer history.) Here is the plot of the dollar va…
