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This paper investigates the validity of the Law of One Price (LOP) in international financial markets by examining the frequency, size and duration of inter-market price differentials for borrowing and lending services ('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 authors find that the LOP holds on average, but numerous economically significant violations of the LOP arise. The duration of these violations is high enough to make it worth-while searching for one-way arbitrage opportunities in order to minimize borrowing costs and/or maximize earnings on given funds.
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