Question
(c) On your team, you also have a talented former trader Michael who is very experienced with the foreign exchange markets. To show her skill
(c) On your team, you also have a talented former trader Michael who is very
experienced with the foreign exchange markets. To show her skill she shows you the
Bloomberg screen with the following information:
Exchange rate: Spot
NZD/USD 1.51.6
NZD/GBP 2.22.3
JPY/USD 100101
JPY/GBP 150152
180-day Forward
NZD/USD 1.61.7
NZD/GBP 2.32.4
JPY/USD 9798
JPY/GBP 147149
Interest rates
USD 5%6%
NZD 8%9%
JPY 3%4%
GBP 7%8%
(simple, p.a.) 180 days
REQUIRED:
(i) Calculate the bid-ask spreads for JPY/USD and JPY/GBP spot markets and
state the units clearly. Why are they positive? How does the liquidity of JPY/USD
spot market compare to the liquidity of the JPY/GBP spot market?
[5 marks]9
Please turn over
(ii) Calculate the synthetic 180-day forward quotes for NZD/USD, NZD/GBP,
JPY/USD, and JPY/GBP.
[10 marks]
(iii) Given the above quotes, can Michael find any arbitrage opportunities or/and
shopping around opportunities?
(c) On your team, you also have a talented former trader Michael who is very
experienced with the foreign exchange markets. To show her skill she shows you the
Bloomberg screen with the following information:
Exchange rate: Spot
NZD/USD 1.51.6
NZD/GBP 2.22.3
JPY/USD 100101
JPY/GBP 150152
180-day Forward
NZD/USD 1.61.7
NZD/GBP 2.32.4
JPY/USD 9798
JPY/GBP 147149
Interest rates
USD 5%6%
NZD 8%9%
JPY 3%4%
GBP 7%8%
(simple, p.a.) 180 days
REQUIRED:
(i) Calculate the bid-ask spreads for JPY/USD and JPY/GBP spot markets and
state the units clearly. Why are they positive? How does the liquidity of JPY/USD
spot market compare to the liquidity of the JPY/GBP spot market?
[5 marks]9
Please turn over
(ii) Calculate the synthetic 180-day forward quotes for NZD/USD, NZD/GBP,
JPY/USD, and JPY/GBP.
[10 marks]
(iii) Given the above quotes, can Michael find any arbitrage opportunities or/and
shopping around opportunities?
(c) On your team, you also have a talented former trader Michael who is very
experienced with the foreign exchange markets. To show her skill she shows you the
Bloomberg screen with the following information:
Exchange rate: Spot
NZD/USD 1.51.6
NZD/GBP 2.22.3
JPY/USD 100101
JPY/GBP 150152
180-day Forward
NZD/USD 1.61.7
NZD/GBP 2.32.4
JPY/USD 9798
JPY/GBP 147149
Interest rates
USD 5%6%
NZD 8%9%
JPY 3%4%
GBP 7%8%
(simple, p.a.) 180 days
REQUIRED:
(i) Calculate the bid-ask spreads for JPY/USD and JPY/GBP spot markets and
state the units clearly. Why are they positive? How does the liquidity of JPY/USD
spot market compare to the liquidity of the JPY/GBP spot market?
[5 marks]9
Please turn over
(ii) Calculate the synthetic 180-day forward quotes for NZD/USD, NZD/GBP,
JPY/USD, and JPY/GBP.
[10 marks]
(iii) Given the above quotes, can Michael find any arbitrage opportunities or/and
shopping around opportunities?
(c) On your team, you also have a talented former trader Michael who is very
experienced with the foreign exchange markets. To show her skill she shows you the
Bloomberg screen with the following information:
Exchange rate: Spot
NZD/USD 1.51.6
NZD/GBP 2.22.3
JPY/USD 100101
JPY/GBP 150152
180-day Forward
NZD/USD 1.61.7
NZD/GBP 2.32.4
JPY/USD 9798
JPY/GBP 147149
Interest rates
USD 5%6%
NZD 8%9%
JPY 3%4%
GBP 7%8%
(simple, p.a.) 180 days
REQUIRED:
(i) Calculate the bid-ask spreads for JPY/USD and JPY/GBP spot markets and
state the units clearly. Why are they positive? How does the liquidity of JPY/USD
spot market compare to the liquidity of the JPY/GBP spot market?
[5 marks]9
Please turn over
(ii) Calculate the synthetic 180-day forward quotes for NZD/USD, NZD/GBP,
JPY/USD, and JPY/GBP.
[10 marks]
(iii) Given the above quotes, can Michael find any arbitrage opportunities or/and
shopping around opportunities?
(c) On your team, you also have a talented former trader Michael who is very
experienced with the foreign exchange markets. To show her skill she shows you the
Bloomberg screen with the following information:
Exchange rate: Spot
NZD/USD 1.51.6
NZD/GBP 2.22.3
JPY/USD 100101
JPY/GBP 150152
180-day Forward
NZD/USD 1.61.7
NZD/GBP 2.32.4
JPY/USD 9798
JPY/GBP 147149
Interest rates
USD 5%6%
NZD 8%9%
JPY 3%4%
GBP 7%8%
(simple, p.a.) 180 days
REQUIRED:
(i) Calculate the bid-ask spreads for JPY/USD and JPY/GBP spot markets and
state the units clearly. Why are they positive? How does the liquidity of JPY/USD
spot market compare to the liquidity of the JPY/GBP spot market?
[5 marks]9
Please turn over
(ii) Calculate the synthetic 180-day forward quotes for NZD/USD, NZD/GBP,
JPY/USD, and JPY/GBP.
[10 marks]
(iii) Given the above quotes, can Michael find any arbitrage opportunities or/and
shopping around opportunities?
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