Are there arbitrage gaps in the UK gilt strips market?

B-Tier
Journal: Journal of Banking & Finance
Year: 2012
Volume: 36
Issue: 11
Pages: 3080-3090

Authors (4)

Armitage, Seth (not in RePEc) Chakravarty, Shanti P. (not in RePEc) Hodgkinson, Lynn (Bangor University) Wells, Jo (not in RePEc)

Score contribution per author:

0.503 = (α=2.01 / 4 authors) × 1.0x B-tier

α: calibrated so average coauthorship-adjusted count equals average raw count

Abstract

Evidence in financial markets of an opportunity for pure arbitrage, and therefore a violation of the law of one price, is considered an anomaly to be noted. This paper reports an apparent violation of the law of one price between UK government gilts and their separately traded principal and coupon strips over a sample period of nearly 14years. There are persistent price differences, and hence opportunities for arbitrage, after allowance for the bid-ask spread; the strips package tends to be overpriced in relation to the corresponding gilt. The price differences may, in part, be due to a lack of liquidity and stale prices in the strips market.

Technical Details

RePEc Handle
repec:eee:jbfina:v:36:y:2012:i:11:p:3080-3090
Journal Field
Finance
Author Count
4
Added to Database
2026-02-02