Question
Assume the following: You can buy a euro for 14 pesos The bank will pay you 13 pesos for a euro You can buy a
Assume the following:
You can buy a euro for 14 pesos
The bank will pay you 13 pesos for a euro
You can buy a U.S. dollar for .9 euros
The bank will pay you .8 euros for a U.S. dollar
You can buy a U.S. dollar for 10 pesos
The bank will pay you 9 pesos for a U.S. dollar
You have $1,000
Can you use triangular arbitrage to generate a profit?If so, explain the order of the transactions that you would execute, and the profit that you would earn.If you cannot earn a profit from triangular arbitrage, explain why.
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Financial Institutions Management A Risk Management Approach
Authors: Marcia Cornett, Patricia McGraw, Anthony Saunders
8th edition
978-0078034800, 78034809, 978-0071051590
