linear programming, currency arbitrage detection, currency exchange, arbitrage theorem
Business | Economics | Finance | Finance and Financial Management
This paper explores the concept of currency arbitrage detection using basic Linear Programming methods. A thorough introduction to currency exchange is given. The Arbitrage Theorem is proven, and the key related concept of pricing via arbitrage is illustrated with an extended example. Next, the basics of Linear Programming are explained theoretically and shown through example. This information is then used to solve for arbitrage opportunities between five major currencies at one point in time, yielding four distinct solution sets. Results are discussed and relativized in the discussion section, where the reader can also find a brief summary of some related literature in the field.
Smith, R. (2013). A Discussion of Linear Programming and its Application to Currency Arbitrage Detection (Undergraduate honors thesis, University of Redlands). Retrieved from https://inspire.redlands.edu/cas_honors/473
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