Date of Award
Bachelor of Science (BS)
Department of Mathematics and Statistics
Edwin O'Shea, Ph.D.
We answer the question, given n currencies and k trades, how can a maximal arbitrage opportunity be found and what is its value? To answer this question, we use techniques from graph theory and employ a max-plus algebra (commonly known as tropical algebra). Further, we show how the tropical eigenvalue of a foreign exchange rate matrix relates to arbitrage among the currencies and can be found algorithmically. We finish by employing time series techniques to study the stability of maximal, high-currency arbitrage opportunities.
Mason, Bradley A., "Tropical Algebra, Graph Theory, & Foreign Exchange Arbitrage" (2016). Senior Honors Projects, 2010-current. 349.