Building Trust Takes Time: Limits to Arbitrage in Blockchain-Based Markets

Autor:	Hautsch, Nikolaus, Scheuch, Christoph, Voigt, Stefan
Jazyk:	angličtina
Rok vydání:	2018
Předmět:	FOS: Economics and business Quantitative Finance - Trading and Market Microstructure General Finance (q-fin.GN) Quantitative Finance - General Finance Trading and Market Microstructure (q-fin.TR)
Popis:	Distributed ledger technologies replace central counterparties with time-consuming consensus protocols to record the transfer of ownership. This settlement latency slows down cross-market trading and exposes arbitrageurs to price risk. We theoretically derive arbitrage bounds induced by settlement latency. Using Bitcoin orderbook and network data, we estimate average arbitrage bounds of 121 basis points, explaining 91% of the cross-market price differences, and demonstrate that asset flows chase arbitrage opportunities. Controlling for inventory holdings as a measure of trust in exchanges does not affect our main results. Blockchain-based settlement without trusted intermediation thus introduces a non-trivial friction that impedes arbitrage activity. This paper replaces an earlier draft titled "Limits to Arbitrage in Markets with Stochastic Settlement Latency". 55 pages, 8 figures, 6 tables
Databáze:	OpenAIRE
Externí odkaz:	https://explore.openaire.eu/search/publication?articleId=doi_dedup___::3e0bf5f16d419f21c32b43878130d3d5 http://arxiv.org/abs/1812.00595 Zobrazit plný text záznamu