Sunday 2011-10-16

Understanding Arbitrage by Randall Billingsley

Have a defined multivariate equivalency between assets? Watch prices and when reality yields an inequality, sell short and buy long the variables as needed to re-establish equality.

Billingsley assumes no familiarity with the math behind financial products and runs a basic introduction to options, forex, and firms' capital structure. From there, he presents a few historical cases (not enough). Oddly, he includes Soros' pound short, which was a one-way trade and not arbitrage in the riskless money-making sense used in the rest of the book.