@murielmotley

Cross-exchange arbitrage relies on evaluating funding costs, transfer latency, and slippage. Capital cost includes margin requirements, borrow rates, and opportunity costs. Execution risk arises from transfer delays, withdrawal limits, and bridge downtime for cross-chain arbitrage. A fair profitability estimate subtracts these from the raw spread. Traders often haircut spreads by 30–50% to reflect hidden frictions. Latency arbitrage requires co-located infrastructure, while manual execution magnifies risks. For thinly traded assets, even small deviations in depth can erase spreads. Ultimately, arbitrage is profitable only if adjusted spread remains consistently above execution and funding costs.

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