(1/2) The Bellman-Ford Algorithm can efficiently capture arbitrage opportunities by finding negative cycles: 👇


In the graph where the edges represent exchange rates, if the product of the exchange rates in a cycle is >1, it indicates the presence of arbitrage opportunities (, meaning the amount of currency increases after going around the cycle ). If the edges are represented as the negative logarithm of the exchange rates, it can equivalently and more simply be stated as "if a cycle is a negative cycle, it indicates the presence of arbitrage opportunities." At this point, the Bellman-Ford algorithm can be used to find this negative cycle.
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