Instruct: Identify the main and secondary category of Arxiv papers based on the titles and abstracts
Query: The microscopic relationships between triangular arbitrage and
  cross-currency correlations in a simple agent based model of foreign exchange
  markets   Foreign exchange rates movements exhibit significant cross-correlations even
on very short time-scales. The effect of these statistical relationships become
evident during extreme market events, such as flash crashes.In this scenario,
an abrupt price swing occurring on a given market is immediately followed by
anomalous movements in several related foreign exchange rates. Although a deep
understanding of cross-currency correlations would be clearly beneficial for
conceiving more stable and safer foreign exchange markets, the microscopic
origins of these interdependencies have not been extensively investigated. We
introduce an agent-based model which describes the emergence of cross-currency
correlations from the interactions between market makers and an arbitrager. Our
model qualitatively replicates the time-scale vs. cross-correlation diagrams
observed in real trading data, suggesting that triangular arbitrage plays a
primary role in the entanglement of the dynamics of different foreign exchange
rates. Furthermore, the model shows how the features of the cross-correlation
function between two foreign exchange rates, such as its sign and value, emerge
from the interplay between triangular arbitrage and trend-following strategies.

24
The categories of this paper are: dg-ga
22
The categories of this paper are: chao-dyn
8
The categories of this paper are: hep-ex
35
The categories of this paper are: mtrl-th
0
The categories of this paper are: hep-ph
18
The categories of this paper are: econ
9
The categories of this paper are: nlin
13
The categories of this paper are: quant-ph
12
The categories of this paper are: nucl-th
4
The categories of this paper are: cond-mat
33
The categories of this paper are: plasm-ph
15
The categories of this paper are: nucl-ex
2
The categories of this paper are: math
25
The categories of this paper are: patt-sol
32
The categories of this paper are: atom-ph
28
The categories of this paper are: alg-geom