Template-Type: ReDIF-Paper 1.0 Author-Name: Rod Cross Author-Name-First: Rod Author-Name-Last: Cross Author-Email: rod.cross@strath.ac.uk Author-Workplace-Name: Department of Economics, University of Strathclyde Author-Name: Victor Kozyakin Author-Name-First: Victor Author-Name-Last: Kozyakin Author-Email: kozyakin@iitp.ru Author-Workplace-Name: Institute for Information Transmission Problems, Russian Academy of Sciences,Bolshoj Karetny lane 19, Moscow 127994 GSP-4, Russia Author-Name: Brian O'Callaghan Author-Name-First: Brian Author-Name-Last: O'Callaghan Author-Email: briantoc@gmail.com Author-Workplace-Name: Department of Applied Mathematics University College Cork, Ireland Author-Name: Alexei Pokrovskii Author-Name-First: Alexei Author-Name-Last: Pokrovskii Author-Email: A.Pokrovskii@ucc.ie Author-Workplace-Name: Department of Applied Mathematics University College Cork, Ireland Author-Name: Alexey Pokrovskiy Author-Name-First: Alexey Author-Name-Last: Pokrovskiy Author-Email: A.Pokrovskiy@lse.ac.uk Author-Workplace-Name: London School of Economics and Political Science Title: Periodic Sequences of Arbitrage: A Tale of Four Currencies Abstract: This paper investigates arbitrage chains involving four currencies and four foreign ex-change trader-arbitrageurs. In contrast with the three-currency case, we find that arbitrage operations when four currencies are present may appear periodic in nature, and not involve smooth convergence to a "balanced" ensemble of exchange rates in which the law of one price holds. The goal of this article is to understand some interesting features of sequences of arbitrage operations, features which might well be relevant in other contexts in finance and economics. Length: 31 pages Creation-Date: 2010-10 Revision-Date: Publication-Status: File-URL: http://www.strath.ac.uk/media/1newwebsite/departmentsubject/economics/research/researchdiscussionpapers/10-19_final.pdf File-Format: Application/pdf Number: 1019 Classification-JEL: C60, F31, D82 Keywords: Limits to arbitrage, Four currencies, Recurrent sequences, Asynchronous systems Handle: RePEc:str:wpaper:1019