Profit distributions of sequential trades and simultaneous trades in arbitrage networks

The paper studies profit distribution mechanism behind market integration process, which is triggered by arbitrageurs' trades. It is assumed that price discrepancy exists among several exchanges and arbitrageurs are attracted to make profits. An arbitrage network is built by considering the exchanges as nodes and the arbitrageurs' trades as edges. Two arbitrageurs' trading modes, i.e. sequential and simultaneous, are investigated. It turns out that both the investors in the exchanges and the arbitrageurs benefit from the trades. In sequential mode, the investors take one third of the total profit while the arbitrageurs take the other two thirds. The simultaneous mode brings competition among the arbitrageurs and asset liquidity among the exchanges, both of which make the profit distribution between the investors and the arbitrageurs differ from that of the sequential mode. The competition helps the investors take a larger share of the total profit, while the asset liquidity works in an opposite way. How strong their influences are relies on the distribution of arbitrageurs' trades.