Arbitrage is defined as near simultaneous purchase and sale of securities or foreign exchange in different markets in order to profit from price discrepancies. Experts believe in the non-existence of arbitrage in an efficient trade market. Arbitrage results in a high profit in a short duration of time without the need of hedging. Detection plays an important role during an arbitrage as an investor who enters the market early, makes the maximum profit. In our experiment, A Bellman-Ford based model is used for detecting the mis-pricing.

Keywords : Arbitrage; Bellman-Ford; foreign exchange; hedging