1a) Assume the cross rate trader at Deutsche Bank notices that Credit Monaco is buying dollars at S( $) 0 7638, the same as Deutsche Banks bid price Similarly, he observes that Barclays is buying British pound at S ($ ) 1 5400, also the same as Deutsche Bank He next finds that Credit Agricole is making a direct market between euro and the pound, with a current ask price of S( ) 1 1705 Outline the arbitrage opportunities 1b) Briefly discuss the difference between Transaction exposure and Translation exposure

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1a) Assume the cross rate trader at Deutsche Bank notices that Credit Monaco is buying dollars at S( $)  0 7638, the same as Deutsche Banks bid price  Similarly, he observes that Barclays is buying British pound at S ($ )  1 5400, also the same as Deutsche Bank  He next finds that Credit Agricole is making a direct market between euro and the pound, with a current ask price of S( ) 1 1705  Outline the arbitrage opportunities 1b) Briefly discuss the difference between Transaction exposure and Translation exposure

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1a) Assume the cross-rate trader at Deutsche Bank notices that Credit Monaco is buying dollars at S(/$)= 0.7638, the same as Deutsche Banks bid price.

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