[Beowulf] Collocation in Iceland?

Prentice Bisbal prentice.bisbal at rutgers.edu
Wed Sep 5 13:03:58 PDT 2012


On 09/05/2012 02:40 PM, Vincent Diepeveen wrote:
> It's from 2010 and it's about arbitrage with a few assumptions.
>
> His assumption is that from 1 location you need to reach more than 2
> exchanges.
> This assumption is wrong.
>
> To make money on the exchange in 99% of cases i'd guess all you need to
> compare 2 different instruments, so that requirest 2 exchanges and
> based upon
> that you can make money.
>
> Using more than 2 means you'll lose money of course.
>
> If i draw a straight line from worlds largest interesting exchange
> which is Chicago
> and i draw a line from there to London and from London to mainland
> Europe,
>

Vincent,

Your logic is flawed. A straight line between Chicago and London (or 
anywhere else) on a flat map is not the shortest distance between two 
points. The earth is round, so you need to use paths along great circles 
to find the shortest path between to points on the earth. On flat maps, 
these look curves going north or south when flying east or west.

See the section "Derivation of shortest paths" here:

http://en.wikipedia.org/wiki/Great_circle

As someone who lives in the NYC area, I've flown between NYC and London 
(and Europe) plenty of times. Airline routes are almost always great 
circles, and I can assure you, every time I've flown between NYC and 
London or continental europe, I flew over Iceland.

Prentice




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