Title: Analyzing and testing the triangular arbitrage parity
Authors: Julia Reynolds - University of Lugano (Switzerland) [presenting]
Leopold Soegner - Institute for Advanced Studies (Austria)
Martin Wagner - University of Klagenfurt (Austria)
Dominik Wied - University of Cologne (Germany)
Abstract: New econometric tools are developed that allow for the monitoring of deviations from arbitrage parities. The econometric methodology is applied in order to test for the stability of the Triangular Arbitrage Parity. Economically relevant variables that possibly result in arbitrage parity violations are analyzed to connect our empirical results to the limits to arbitrage literature. In addition, we also check whether (possible) arbitrage parity deviations can be connected to historical events such as the failure of Lehman Bros. or to central bank interventions.