Senior Honors Projects, 2010-2019
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This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License.
Date of Graduation
Spring 2017
Document Type
Thesis
Degree Name
Bachelor of Science (BS)
Department
Department of Mathematics and Statistics
Advisor(s)
Edwin O'Shea
Abstract
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.
Recommended Citation
Mason, Bradley A., "Tropical algebra, graph theory, & foreign exchange arbitrage" (2017). Senior Honors Projects, 2010-2019. 349.
https://commons.lib.jmu.edu/honors201019/349
