Question
Given the following two sets of quotations by two currency dealers: Dealer A Dealer B Bid Ask Bid Ask $1.2320/ $1.2480/ $1.2100/ $1.2260/ State, without
Given the following two sets of quotations by two currency dealers:
Dealer A Dealer B
Bid Ask Bid Ask
$1.2320/ $1.2480/ $1.2100/ $1.2260/
State, without any calculations or explaining the transactions (thats coming in part b), whether these two sets of quotations are out of equilibrium to a degree that would lead to an arbitrage opportunity in the absence of any transaction costs beyond the bid/ask spread.
Prove your point by narrating the trading activities that you need to perform and by calculating arbitrage profit if you start with a nominal sum of $68 million.
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