What Are the Main Risks Associated with Triangular Arbitrage? ▴ Learn

What Are the Main Risks Associated with Triangular Arbitrage?

The primary risks in triangular arbitrage are execution risk and market volatility. Execution risk involves the failure to complete all three trades at the desired prices, often due to slippage or network latency.

Market volatility can cause prices to change mid-trade, erasing the arbitrage opportunity before the final leg of the trade is complete. Additionally, thin liquidity in one of the trading pairs can lead to significant slippage, turning a potentially profitable trade into a loss.

What Is ‘Negative Slippage’ and How Does It Differ from ‘Positive Slippage’?

How Does the Concept of “Skewness” in the Implied Volatility Surface Affect the Mid-Price Calculation?

What Is “Slippage” and How Does It Affect the Final Liquidation Price for a Large Position?

Distinguish between ‘Positive Slippage’ and ‘Negative Slippage’