Free Webinar: Nikolaus Hautsch: Limits to Arbitrage in Blockchain-Based Markets
Webinar
Thursday, May 28, 2020 - 06:30 PM
Until: Thursday, May 28, 2020 - 08:30 PM
(Adjusted for timezone: Europe/London)
Categories
PLEASE NOTE THAT THIS WEBINAR WILL START ON THURSDAY, 28 MAY, 2020, AT 6:30 PM ***LONDON TIME*** (01.30 PM ***EDT***)
TITLE: Building Trust Takes Time: Limits to Arbitrage in Blockchain-Based Markets
ABSTRACT:
Distributed ledger technologies replace trusted clearing counterparties and security depositories with time-consuming consensus protocols to record the transfer of ownership. This settlement latency exposes cross-market arbitrageurs to price risk. We theoretically derive arbitrage bounds that increase with expected latency, latency uncertainty, volatility and risk aversion. Using Bitcoin orderbook and network data, we estimate arbitrage bounds of on average 121 basis points, explaining 91\% of the observed cross-market price differences. Consistent with our theory, periods of high latency-implied price risk exhibit large price differences, while asset flows chase arbitrage opportunities. Blockchain-based settlement thus introduces a non-trivial friction that impedes arbitrage activity.
BIOGRAPHY
Nikolaus Hautsch is Professor of Finance and Statistics at the University of Vienna. He earned his Ph.D. in econometrics in 2003 from the University of Konstanz. From 2004 to 2007 he joined the Department of Economics of the University of Copenhagen as Assistant Professor and Associate Professor. Until 2013 he held the Chair of Econometrics at Humboldt University Berlin and was director of the Berlin Doctoral Program in Economics and Management Science. He is elected fellow of the Society for Financial Econometrics, research fellow of the Center for Financial Studies (CFS) Frankfurt and a staff member of the Vienna Graduate School of Finance. Hautsch had visiting positions at the University of Technology, Sydney, the University of Melbourne, the Université Catholique de Louvain, the University of Cambridge and Duke University. His research focuses on the econometrics of high-frequency financial data, market microstructure analysis, the modelling of volatility and liquidity, systemic risk and information processing on financial markets. He publishes in leading journals in the area of finance, econometrics and statistics. He serves on the editorial board of several leading journals, such as the Journal of Business and Economic Statistics, the Journal of Applied Econometrics and the Journal of Financial Econometrics.
LINKS TO PAPERS
https://arxiv.org/abs/1812.00595
For more information, please visit https://www.meetup.com/thalesians/events/270360630/
TITLE: Building Trust Takes Time: Limits to Arbitrage in Blockchain-Based Markets
ABSTRACT:
Distributed ledger technologies replace trusted clearing counterparties and security depositories with time-consuming consensus protocols to record the transfer of ownership. This settlement latency exposes cross-market arbitrageurs to price risk. We theoretically derive arbitrage bounds that increase with expected latency, latency uncertainty, volatility and risk aversion. Using Bitcoin orderbook and network data, we estimate arbitrage bounds of on average 121 basis points, explaining 91\% of the observed cross-market price differences. Consistent with our theory, periods of high latency-implied price risk exhibit large price differences, while asset flows chase arbitrage opportunities. Blockchain-based settlement thus introduces a non-trivial friction that impedes arbitrage activity.
BIOGRAPHY
Nikolaus Hautsch is Professor of Finance and Statistics at the University of Vienna. He earned his Ph.D. in econometrics in 2003 from the University of Konstanz. From 2004 to 2007 he joined the Department of Economics of the University of Copenhagen as Assistant Professor and Associate Professor. Until 2013 he held the Chair of Econometrics at Humboldt University Berlin and was director of the Berlin Doctoral Program in Economics and Management Science. He is elected fellow of the Society for Financial Econometrics, research fellow of the Center for Financial Studies (CFS) Frankfurt and a staff member of the Vienna Graduate School of Finance. Hautsch had visiting positions at the University of Technology, Sydney, the University of Melbourne, the Université Catholique de Louvain, the University of Cambridge and Duke University. His research focuses on the econometrics of high-frequency financial data, market microstructure analysis, the modelling of volatility and liquidity, systemic risk and information processing on financial markets. He publishes in leading journals in the area of finance, econometrics and statistics. He serves on the editorial board of several leading journals, such as the Journal of Business and Economic Statistics, the Journal of Applied Econometrics and the Journal of Financial Econometrics.
LINKS TO PAPERS
https://arxiv.org/abs/1812.00595
For more information, please visit https://www.meetup.com/thalesians/events/270360630/