Arbitrage Basics: Graph Theory for Multi-Pair Arbitrage Detection
Welcome Back to Arbitrage Basics
In our previous post on triangular arbitrage, we covered 3-pair arbitrage. This time we’ll use graph theory to find arbitrage across any number of trading pairs.
By modeling pairs as a weighted directed graph, we can use Bellman-Ford to detect negative cycles, which correspond directly to profitable arbitrage loops.
Why Graph Theory for Arbitrage?
Traditional triangular arbitrage only checks predefined 3-token paths. But what if profitable opportunities exist across 4, 5, or even 10 different tokens? Manual enumeration becomes computationally expensive and misses complex paths.