---
title: "Arbitrage and Relative Value | Path 18 | RupeeCase Learn"
description: "Arbitrage and relative value in Indian markets: cash futures arbitrage, box spreads, conversions, pairs trading, cointegration and dispersion, from NSE data."
source_url: "https://www.rupeecase.com/learn/path-18/"
---

[RupeeCase Learn](/learn/)/Path 18/Intermediate

# Arbitrage and Relative Value

    Cash futures arbitrage, conversions and reversals, box spreads, calendar arbitrage, pairs and cointegration, implied correlation and dispersion.

* **14**modules
* **143 min**of reading
* **30**question path test
* **Free**with a certificate

    [Start at 18.1](/learn/path-18/module-18-1-cash-futures-arbitrage)See the stops

      01The line

## 14 stops, 14 live.

      Where two prices should agree, and what it costs to make them. Arbitrage between cash and futures, the parity trades, and the statistical relative value that quant desks run, risks spelt out.

      **0**of 14 done on this device

1. [18.1Cash futures arbitrage and the Nifty 50 Arbitrage indexBuy the shares, sell the future and keep the gap, if the gap is bigger than the costs. On the three June 2026 dates here, it was not9 min](/learn/path-18/module-18-1-cash-futures-arbitrage)

2. [18.2Conversions and reversalsThree legs on one strike lock the gap between options and the future. What a file shows is a paper lock, not a profit9 min](/learn/path-18/module-18-2-conversions-and-reversals)

3. [18.3Pair trading intuition: correlation is not cointegrationTwo prices can move together every day and still drift apart. A pair trade needs the gap to have a home8 min](/learn/path-18/module-18-3-pair-trading-intuition)

4. [18.4Futures calendar arbitrage and roll dynamicsThe gap between two Nifty futures is a price for carry and for the roll. Read it as an implied forward rate and see why it is not a lock10 min](/learn/path-18/module-18-4-futures-calendar-arbitrage)

5. [18.5Box spreads with European index optionsFour options that pay a fixed amount are a loan in disguise. Read the rate the settle prices imply, then count what the legs cost to hold11 min](/learn/path-18/module-18-5-box-spreads)

6. [18.6Parity deviations in practice: what the frictions costA gap of a few points looks like free money. Count it by strike, by date and against the charges before you call it anything10 min](/learn/path-18/module-18-6-parity-deviations)

7. [18.7Cointegration toolkit: Engle Granger, ADF, half life and z scoreRegress, test the spread, time its return, measure its stretch, then judge it on days it never saw10 min](/learn/path-18/module-18-7-cointegration-toolkit)

8. [18.8Pair trading with Indian stock futuresThe test passed. Now the legs have lots, a calendar, a delivery date and a cost10 min](/learn/path-18/module-18-8-pair-trading-with-stock-futures)

9. [18.9Mean reversion against momentumBoth styles can find a quarter that suits them. Two plain measures say how much the file supports either10 min](/learn/path-18/module-18-9-mean-reversion-vs-momentum)

10. [18.10Implied correlationThe index is priced calmer than its parts. Implied correlation turns that gap into one number, with a floor, a ceiling and a long list of things it leaves out12 min](/learn/path-18/module-18-10-implied-correlation)

11. [18.11Dispersion trades: construction and risksSell index volatility, buy stock volatility, hedge delta. What is left is a short position in correlation, and the Indian market adds settlement, lots and bans11 min](/learn/path-18/module-18-11-dispersion-trades)

12. [18.12The correlation risk premiumIndex options priced the stocks to move together more than they did. What that gap is, and what it is not11 min](/learn/path-18/module-18-12-correlation-risk-premium)

13. [18.13Baskets, PCA stat arb and Johansen testsStrip out the shared moves, test what is left, and count how many baskets you looked at11 min](/learn/path-18/module-18-13-pca-stat-arb)

14. [18.14Kalman filter hedge ratiosA ratio that drifts looks calmer than one that is fixed. Whether it is better is a different question11 min, path test](/learn/path-18/module-18-14-kalman-filter-hedge-ratios)

    02Outcomes

## What you will be able to do.

* *01*Compute the yearly return of a cash futures arbitrage after costs
* *02*Check a box spread against the risk free rate
* *03*Test a pair for cointegration before reading its spread
* *04*Explain implied correlation and what a dispersion trade is exposed to

    03Certificate

## Pass the path test.
Keep the proof.

1. **1**Read the modules and try each quick check (optional)A pass gives that module's own certificate
2. **2**Take the 30 question path test21 correct to pass, drawn from 210 questions
3. **3**Get the certificateWith an ID and a QR code

    [Jump to the path test](/learn/path-18/module-18-14-kalman-filter-hedge-ratios#pathTestSection)[About the certificates](/learn/certificates)

    04Questions

## About Path 18.

    What does Path 18, Arbitrage and Relative Value, cover?Cash futures arbitrage, conversions and reversals, box spreads, calendar arbitrage, pairs and cointegration, mean reversion and momentum, implied correlation and dispersion.

Is arbitrage risk free?No. Costs, margin, execution and the funding rate decide whether a price gap is a profit, and statistical relative value trades can lose for long stretches. The path spells out each risk.

What should I read before Path 18?Paths 13 and 14: arbitrage trades combine futures and options, and the parity relations come from Path 14.

    Explore next

## Where to go next.

* [QuestionsQuestions on futures and optionsShort answers, each with a dated chart](/learn/questions/)
* [ToolOption payoff builderLegs on a dated Nifty chain, breakevens and charges](/learn/tools/payoff-builder)
* [Free module 6.6Derivatives, Futures and Options for the Systematic Investor8 min read](/learn/path-6/module-6-6-derivatives-futures-options)

      Community

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    [Before this pathPath 13: FuturesBeginner, 7 modules](/learn/path-13/)
    [Before this pathPath 14: Options and GreeksBeginner, 17 modules](/learn/path-14/)
    [Next pathPath 19: Algo, HFT and Backtesting16 modules, 172 min](/learn/path-19/)
    [Pillar guideDerivatives and Quant115 modules](/learn/derivatives)
    [F&O on RupeeCaseHedging only, in developmentProtection for a portfolio you own, by a published rule](/hedging)

  Education only, not investment advice, a research report or a recommendation to buy, sell or hold any security. RupeeCase (QC Alpha Technologies Pvt Ltd) is not registered with SEBI as an investment adviser or research analyst. Contracts and prices shown are for illustration only, come from NSE end of day files at least 30 days old, and are not recommendatory. Derivatives trading carries a high risk of loss.