Relativistic Statistical Arbitrage... Yeah...

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An interesting new paper has just been released: Relativistic Statistical Arbitrage

Yes - this is mixing Einstein and Michael Douglas. And the results? Pretty wild.

Basically, very rapid trading and the ability to arbitrage prices around the world (arbitrage is exploiting price differences - basically it is like buying something very cheap off woot.com and reselling it on eBay for a profit, or buying something off eBay and selling it to your idiot cousin for even more profit. Full disclosure - I have no idiot cousins, they are all older than me, and smart. Too bad for me - but go out and arbitrage your cousins if you can) is increasingly being limited by... the speed of light.

Yeah, literally, the speed of light.
Trading at the Speed of Light The large red dots represent major financial markets, while the blue represent optimal trading centers to take advantage of the speed of light to execute trades faster between any two given markets. Such trading could bring financial capital to out-of-the-way parts of the globe.Alexander Wissner-Gross (PDF)

Basically the paper analyzes the optimal places to establish your trading operations in order to best utilize the speed of light to your advantage. Interestingly, I had previously seen that Siberia would be one of the best trading locations, but that does not seem to be the case here with the Atlantic, Europe, and the Pacific Rim dominating the "optimal" trading locations.

So here you go - pick a blue dot, get some fiber optic cable, and arbitrage the shit out of the markets. I call dibs on the blue dot in the lower left corner, because honestly if you are going to be price arbitraging the world markets at the speed of light, and you are NOT doing it from an Antarctic base, you fucked up.

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