Arbitrage Basics: Graph Theory for Multi-Pair Arbitrage Detection
Welcome Back to Arbitrage Basics
In our previous post on triangular arbitrage, we explored the fundamentals of 3-pair arbitrage opportunities. Today, we’re taking a significant leap forward by applying graph theory to discover arbitrage opportunities across any number of trading pairs. This approach transforms arbitrage detection from manual triangle checking into a systematic algorithmic problem.
By modeling trading pairs as a weighted directed graph, we can use classical algorithms like Bellman-Ford to detect negative cycles - mathematical representations of profitable arbitrage loops.