I argue that arbitrage mistranslates factor information from ETFs to constituent securities and distorts comovement. The intuition behind this distortion is arbitrageurs trade constituent securities not based on their fundamental exposures but by their portfolio weights, causing securities to...

We show that investment decisions of ETF market participants when trading country ETFs are mostly driven by shocks to U.S. fundamentals, rather than local risks. Investors react only to negative news about local economies. When U.S. economic uncertainty increases, investors switch to Cash ETFs....

Recent research has documented that delaying the commencement of Social Security benefitsincreases the expected present value of retirement income for most people. Despite this research,the vast majority of individuals claim Social Security at or before full retirement age. ClaimingSocial...

An emerging literature relies on an index of limits of arbitrage in fixed-income markets. We analyze the benefits of an index that is model-free, robust and intuitive. This new index strengthens the evidence that limits of arbitrage proxy for risks priced in the cross-section of returns. Trading...

In this paper, we analyze the process of constructing cointegrated portfolios of cryptocurrencies. Our procedure involves a series of statistical tests, including the Johansen cointegration test and Engle-Granger two-step approach. Among our results, we construct cointegrated portfolios...

Banks are regulated more than most firms, making them good subjects to study regulatory arbitrage (avoidance). Their latest arbitrage opportunity may be the new leverage rule covering the largest U.S. banks; leverage rules require equal capital against assets with unequal risks, so banks can...

We present a novel and flexible technique for the construction of tractable, and fully arbitrage-free, Local-Stochastic Volatility (LSV) term distribution models. The method utilizes Lamperti's harmonic transform to combine a pure stochastic volatility (SV) process MT with a general local...

Cryptocurrency markets exhibit periods of large, recurrent arbitrage opportunities across exchanges. These price deviations are much larger across than within countries, and smaller between cryptocurrencies, highlighting the importance of capital controls for the movement of arbitrage capital....

Regulatory arbitrage — defined as the manipulation of regulatory treatment for the purpose of reducing regulatory costs or increasing statutory earnings — is often seen in heavily-regulated industries. An increase in the regulatory nature of copyright, coupled with rapid technological...

The change subsequent to the sub-prime crisis pushed pressure on decreased financial products complexity, going from exotics to vanilla options but increase in pricing efficiency. We introduce in this paper a more efficient methodology for vanilla option pricing using a scenario based particle...