Question
a.Conduct an arbitrage between HSBC shares listed on the HKSE and those listed on the LSE. Assume the transaction was for 100,000 shares purchased at
a.Conduct an arbitrage between HSBC shares listed on the HKSE and those listed on the LSE. Assume the transaction was for 100,000 shares purchased at the closing price on the London Stock Exchange (LSE) on 31 March 2020 and all shares were sold at the opening price on the Hong Kong Stock Exchange (HKSE) on 1 April 2020. Assume brokerage fee at 0.4% per trade and that it was possible to conduct the arbitrage across the two markets.
You are provided with additional information:
31 March 2020 - HKD/GBP spot rate (mid) 0.10440
1 April 2020- HKD/GBP spot rate Bid 0.10400 and offer 0.10450
GBP borrowing rate = GBP LIBOR (overnight) + 0.3 basis points
GBP LIBOR (Overnight)
June 01 2020
0.05363%
May 01 2020
0.05175%
April 01 2020
0.06338%
March 02 2020
0.68413%
February 03 2020
0.68263%
January 02 2020
0.66613%
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Multinational Business Finance
Authors: David K. Eiteman, Arthur I. Stonehill, Michael H. Moffett
13th edition
132743469, 978-0132743464
