# main arbitrage & statistical arbitrage concepts

Can we please sumarise here some of the basic concepts, tools used in arbitrage and statistical arbitrage in real life?

1. ARB: benefit from price difference on same asset
2. ARB: difference between stock index and syntetic index constructed from stocks
3. ARB: triangular arb (is this being exploited? by who? where?)
4. ARB/STATARB: difference between futures and theo futures
5. STATARB: cointegration/correlation

• "Arbitrage" is broad field. The tools and concepts used in arbitrage would be a book. – chrisaycock Mar 13 '13 at 18:31
• thanks. yes, sure, but as above: we can highlight main ideas. is there something as important as above which I haven't mentioned? – 4pie0 Mar 13 '13 at 18:33

There are many. Just to list a few:

Capital structure arbitrage (CDS)
Convertible bonds arbitrage
Merger arbitrage
Latency arbitrage
Correlation and volatility arbitrage
Municipal bond relative value arbitrage
Regulatory arbitrage
...

They are all easily googled. However, the main idea is always the same.

• please follow my convention and describe each term in one short sentence. what mean i.e. "Exchange-traded funds arbitrage", it is like "stocks arbitrage". and next example: "latency arbitrage" - isn't it what I described as"ARB: benefit from price difference on same asset"? please add tag ARB or STATARB – 4pie0 Mar 13 '13 at 19:08
• @cf16 You aren't in a position to make demands. – chrisaycock Mar 13 '13 at 19:39
• @chrisaycock it is not demand – 4pie0 Mar 13 '13 at 19:41
• I'll answer some questions if you tell me what your profile picture is a volatility smile of, why you are going flat vol, and why are you linearly interpolating :) – Andrew Mar 13 '13 at 23:18
• @Andrew it is CHF/PLN FX pair, some day of February 2011, it is converted from Delta-Term surface which was already created with linear interpolation. in my conversion algorithm interpolation doesn't matter so much because I take every point $(\tau,\Delta,\sigma)$ of original surface and convert to corresponding $(\tau,K,\sigma)$ point. ofcourse there is still question what interpolation to use for this new surface – 4pie0 Mar 14 '13 at 20:39

Listing a few topics:

• Arbitrage in commodities
• Arbitrage in cryptocurrencies - Specific coin that’s cheaper on Exchange A than on Exchange B. Buy the coin on Exchange A, sell it for a higher price on Exchange B. It sounds easy but the implementation is difficult.
• Index Arbitrage - Difference in value between a portfolio of stocks constituting an index and the futures on that index.
• ADF test and Johansen test - To check cointegration
• Half-life of mean-reverting time series