The Value of Arbitrage

• 成果类型: Article
• 署名作者: Davila, Eduardo; Graves, Daniel; Parlatore, Cecilia
• 署名单位: Yale University; New York University; National Bureau of Economic Research; Centre for Economic Policy Research - UK
• 刊物名称: JOURNAL OF POLITICAL ECONOMY
• ISSN/ISSBN: 0022-3808
• DOI: 10.1086/728453
• 发表日期: 2024
• 页码: 1947-1993
• 关键词: Welfare; models; inflation; MARKETS; money; cost

摘要

This paper studies the social value of closing price differentials in financial markets. We show that arbitrage gaps exactly correspond to the marginal social value of executing an arbitrage trade. Moreover, arbitrage gaps and price impact measures are sufficient to compute the total social value from closing an arbitrage gap, which may emerge for different reasons, including nonpecuniary benefits of holding particular assets. Theoretically, we show that, for a given arbitrage gap, the total social value of arbitrage is higher in more liquid markets. We compute the welfare gains from closing arbitrage gaps for covered interest parity violations.