Author(s)

Tianyu Zhou

Corresponding Author

Tianyu Zhou

ABSTRACT

Much research is done on cryptocurrency time-series and cross-section price prediction due to the sharp rise of cryptocurrency prices. However, arbitrage can provide minimum risk opportunities that are very beneficial for portfolio optimization, based on paper and theory. So we summarized the popular arbitrage methods on the stock market and cryptocurrency. More importantly, we tested the potency of some traditional stock market arbitrage techniques through cryptocurrency data backtesting and live trading. This paper examines some common and unique arbitrage opportunities in cryptocurrency exchanges that are not widely mentioned in academic journals. Though backtesting with trading fees and live trading, we analyzed the validity of the following arbitrage methods: Exchange futures contract funding rate arbitrage, Exchange futures contract intertemporal arbitrage, and asset price deviation arbitrage. The asset price deviation arbitrage here includes the triangular arbitrage, the pairs trading, and the order book spread prediction arbitrage.

KEYWORDS

risk-free, arbitrage, cryptocurrency, quantitative analysis, portfolio optimization