This repository includes code used to visualise the findings in Python and Matlab. The empirical design is separated into 2 sections: arbitrage and transaction costs.
This section intends to show the price discrepancies between two tickers (ES=F, SPY) following the same index S&P 500. The lower the latency, the greater opportunities there are to exploit the price differences by applying arbitrage method. By buying an ETF (SPDR S&P 500 ETF Trust (SPY)) on NYSE (= New York Stock Exchange), and selling the future contract (E-Mini S&P 500 (ES=F)) at almost the same time (differrence in milliseconds) on CME (= Chicago Market Exchange), the trader can generate alpha and gain profit relative to the size of money invested.
Transaction costs can have an arbitrary effect on the assets' prices, as they can erode all the profit, especially if the trader is very active, which can discourage certain traders, which further impacts the prices arbitrarily. The graphs are intended to show this situation.