Title: Deviations from triangular arbitrage parity in foreign exchange and bitcoin markets
Authors: Julia Reynolds - Universita della Svizzera italiana (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 applied to monitor and detect so-called ``financial market dislocations'', defined as periods in which substantial deviations from arbitrage parities take place. In particular, we focus on deviations from the triangular arbitrage parity for exchange rate triplets. Due to increasing media attention towards mispricing in the market for cryptocurrencies, we include the cryptocurrency Bitcoin in addition to fiat currencies. We do not find evidence for substantial deviations from the triangular arbitrage parity when only traditional fiat currencies are concerned. However, we document significant deviations from triangular arbitrage parities in the newer markets for Bitcoin.