Research On Financial Arbitrage Behavior In The Financial Economy

Financial arbitrage is a sort of activity which company or investor take advantage of the unequilibrium existed in the financial market to benefit themselves. It widely exists in the modern financial economy. The unequilibrium of financial market has plenty of content, and so there are many types arbitrage. These arbitrage form into a arbitrage's network around the price arbitrage. From a point of view of market working, financial market is composed of price mechanism and financial institution, correspondingly, financial arbitrage divide into price arbitrage and regulatory arbitrage, both of them form the main body of arbitrage. The existence of the unequilibrium implies that the market goes, against the law of one price, and as a matter of fact, arbitrage is a process which arbitrageur makes use of these opportunities and the market resumes equilibrium. The arbitrage is one of necessary condition that ensure the financial market work efficiently because it help to advance and maintain the asset pricing efficiency, institutional efficiency and resource allocation efficiency, furthermore, arbitrage also improve market liquidity, promote financial integration and deregulation. But at the same time, the financial arbitrage also brings the negative effect such as increasing market volatility, impacting the monetary policy and financial supervision®ulation, increasing potential financial risk and even giving rise to financial risk. Therefore, financial supervisor must fully understand both side of effect of arbitrage when they treat with arbitrage activity. On the one hand, the supervisor should make most of the positive effect of arbitrage to improve the quality of market working, on the other hand, it is necessary that take some measure to control risk produced by arbitrage.