Strategy lab
Every strategy from 151 Trading Strategies and all 101 Formulaic Alphas as formulas you can edit and backtest on ten years of daily stocks, ETFs, futures, forex and crypto data. Free, in your browser.
8.5Foreign exchangeChart
FX triangular arbitrage
Three exchange rates imply a fourth. If converting A→B→C→A returns more than you started with, the loop is an arbitrage. Such gaps last milliseconds.
Note. Daily closes are stamped at slightly different times, so the visible gaps are mostly timing noise, which is the point: at daily frequency there is nothing to arbitrage.
Edit anything; the result updates as you type. Lines like window = 20 become sliders.
Hypothetical backtests on daily closes with no slippage unless you add costs. Survivorship bias applies: the stock list is today’s large caps. For learning, not investment advice. Data: Yahoo Finance via yfinance.
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- 151 Trading Strategies
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- 8.5 · Foreign exchange
- Asset class
- Forex
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FX triangular arbitrage (8.5)
Three exchange rates imply a fourth. If converting A→B→C→A returns more than you started with, the loop is an arbitrage. Such gaps last milliseconds.
Key equation
Lab formula
// Implied EUR/JPY from EUR/USD × USD/JPY versus quoted EUR/JPY
of("EURUSD=X", close) * of("JPY=X", close) / of("EURJPY=X", close) - 1Daily closes are stamped at slightly different times, so the visible gaps are mostly timing noise, which is the point: at daily frequency there is nothing to arbitrage.
More in Foreign exchange
- 8.1 Moving averages with HP filter
- 8.2 Carry trade
- 8.2.1 High-minus-low carry
- 8.3 Dollar carry trade
- 8.4 Momentum and carry combo
Source: Kakushadze, Z. and Serur, J. A. (2018). 151 Trading Strategies. Palgrave Macmillan. SSRN 3247865. Summaries are our own.