Examples of Arbitrage and Statistical Arbitrage Strategies

Summary

The note surveys several forms of arbitrage and relative-value trading rather than developing one strategy in depth. Examples include capital-structure and convertible-bond trades, merger and latency arbitrage, ETF and index arbitrage, and relative-value opportunities in municipal bonds. It also mentions commodity and cryptocurrency arbitrage, including buying an asset where it is cheaper and selling where it is more expensive, as well as comparing an index basket with its futures contract.

For statistical arbitrage research, the note names cointegration tests such as ADF and Johansen and the half-life of mean reversion as useful concepts. These are topic pointers, not a unified implementation guide: they give no test results, trading rules, transaction-cost analysis, or evidence that any listed opportunity is profitable. The cross-exchange example explicitly notes that execution makes an apparently simple price difference difficult to capture.

Key ideas

• Arbitrage categories span securities, corporate events, instruments, venues, and regulatory settings.
• Index arbitrage compares an index futures contract with its constituent stock portfolio.
• Cross-exchange crypto arbitrage seeks to trade price differences across venues, but implementation can be difficult.
• Cointegration tests and mean-reversion half-life are tools associated with statistical arbitrage.

Tags

# main arbitrage & statistical arbitrage concepts


# main arbitrage & statistical arbitrage concepts












Can we please sumarise here some of the basic concepts, tools used in arbitrage and statistical arbitrage in real life?







- ARB/STATARB: difference between futures and theo futures



These are main directions I can think about at the moment. Can you please add more? Please share a link and/or a brief description.

## Answer by Alexey Kalmykov (score 4)

https://quant.stackexchange.com/a/7520

There are many. Just to list a few:

Capital structure arbitrage (CDS) Convertible bonds arbitrage Merger arbitrage Latency arbitrage Exchange-traded funds arbitrage Correlation and volatility arbitrage Municipal bond relative value arbitrage Regulatory arbitrage ...

They are all easily googled. However, the main idea is always the same.

## Answer by vibhu_singh (score 0)

https://quant.stackexchange.com/a/43411

Listing a few topics:

- Arbitrage in commodities

- Arbitrage in cryptocurrencies - Specific coin that’s cheaper on Exchange A than on Exchange B. Buy the coin on Exchange A, sell it for a higher price on Exchange B. It sounds easy but the implementation is difficult.

- Index Arbitrage - Difference in value between a portfolio of stocks constituting an index and the futures on that index.

- ADF test and Johansen test - To check cointegration

- Half-life of mean-reverting time series

Shown in full with attribution under the source's licence. Licence: CC BY-SA 4.0 (Stack Exchange)

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.