I wrote a first draft of an article explaining what I believe to be an arbitrage situation with DMS.SELLING and mining difficulty futures on icbit.se (hence my previous questions about the cashflow of DMS.SELLING).
http://www.crypto-finance.com/difficulty_arbitrage.pdfI'm hoping that financially/mathematically skilled people can let me know about any mistakes. I hope you guys enjoy the read.
One problem is that it will remain a theoretical arbitrage rather than a practical one. For it to be useful in practice you'd have to rely on the market correctly pricing SELLING at the settlement on icbit.se.
A second issue is that if you assume the icbit.se projected difficulty rise is correct then you could almost certainly make significantly more money by just buying PURCHASE, splitting it and selling MINING - as their projection is a LOT worse than the one the market appears to be using in its current valuation. I haven't, however, looked at icbit - and it may well be that their projection is just what they're using when selling futures - and so is nowhere near what even they believe (but rather a projection sufficiently high that they're confident of profit). That's in the same way that if you go to a bookie and they offer you an even money bet they do NOT believe you'll win half the time.