Question
Assume you are a trader with China Bank. From the quote screen on your computer terminal, you notice that Maybank is quoting RM_________/$1.00 (please refer
Assume you are a trader with China Bank. From the quote screen on your computer terminal, you notice that Maybank is quoting RM_________/$1.00 (please refer to your assigned rate in the given table) and CIMB Bank is offering SGD___________/$1.00 (please refer to your assigned rate in the given table) . You learn that Public Bank is making a direct market between Malaysian ringgit and Singapore dollar, with a current RM/SGD quote of 3.015. Show how you can make a triangular arbitrage profit by trading at these prices. (Ignore bid-ask spreads for this problem.) Assume you have RM1,000,000 with which to conduct the arbitrage. What RM/SGD price will eliminate triangular arbitrage?
Given rate for RM/USD | Given rate for SGD/USD |
4.00 | 1.20 |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started