During our discussion of the Depression and interest rates, the concept of arbitrage was brought up. In the following article, analysts address the presence of arbitrage in foreign markets. They stipulate that the “duration of arbitrage opportunities is, on average, high enough to allow agents to exploit these opportunities, but low enough to explain why such opportunities can be difficult to detect using low-frequency data” (Akram, Dagfinn, Sarno). In other words, arbitrage opportunities do exist across markets but require great attention to quickly changing details. Furthermore, these opportunities are so short lived that, on average, a no-arbitrage condition basically does exist.
http://www.voxeu.org/index.php?q=node/2481
-Cecilia Coetsee
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