Question
Cotton bale is traded in both New York and London commodities market. The following quotes have been obtained from the two markets: New York: $152
Cotton bale is traded in both New York and London commodities market. The following quotes have been obtained from the two markets: New York: $152 per cotton bale London: 100 per cotton bale Value of 1: $1.3500 A trader does the following: 1. Buys 100 Cotton Bales in New York 2. Sells the Cotton Bales in London 3. Converts the sale proceeds from pounds to dollars.
a. Explore if there a possibility of arbitrage?
b. What is the profit or loss that the trader makes in the above case?
Please share the solution with all the steps of analysis for better understanding
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