Question
Problem 7 Consider the following table of exchange rates in the worlds currency market: USD Yen Mark Franc USD 1 111.52 1.4987 5.0852 Yen .008966
Problem 7
Consider the following table of exchange rates in the worlds currency market:
| USD | Yen | Mark | Franc | |
|---|---|---|---|---|
| USD | 1 | 111.52 | 1.4987 | 5.0852 |
| Yen | .008966 | 1 | .013493 | .045593 |
| Mark | .6659 | 73.964 | 1 | 3.3823 |
| Franc | .1966 | 21.933 | .29507 | 1 |
Formulate a shortest path problem to detect arbitrage. Do we have an arbitrage with the given exchange rates?
Hint: You will need to consider the logarithm of each currency exchange rate. You do not need to compute those logarithms. For example, for the logarithm of the exchange rate from USD to Yen, you can just write log(111.52).
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A Compilation Of University Level Assignments Marketing Audit Approach
Authors: Emeka Anyaduba
1st Edition
1475098057, 978-1475098051
