Hellenic Open University Conferences, International Conference on Business & Economics of the Hellenic Open University 2015

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Triangular Arbitrage in Forex Market, Emerging Vs Developed
Eleni Kyriaki, Kristian Dukov

Building: Titania
Room: Platon
Date: 2015-02-07 11:00 AM – 01:00 PM
Last modified: 2015-01-27


According to Fama’s Efficiency Market Hypothesis (EMH), markets are efficient and an investor cannot increase his returns without taking an additional risk. However, the topic still remains disputable since researchers have introduced controversial findings after investigating different markets. The goal of this study is to answer the following research question, “Is there a difference in triangular arbitrage opportunities between emerging markets and developed ones?”

The market we are interested in is the Forex market, a decentralized market where currencies from all over the world are traded. The method used that applies for inefficiency is called triangular arbitrage and it involves selling and buying 3 sets of currency pairs in times when a parity is violated. Our sample consists of quantitative data totalling to 2.4 million observations per quotation taken from 2011 and 2013 for currencies picked using a non-probability convenience method based on their property to be converted to EUR and USD currency and availability of information.

The research revealed that differences between the two types of market exist, and indicates that the “early” markets possess higher arbitrage activity in contrast to the mature economies.


Efficient Market Hypothesis, Triangular arbitrage, Magnitude, Developed markets, Emerging markets, Forex, Currencies, High Frequency Trading, Arbitrage Opportunities