Question 4: Assume you are a trader in foreign currencies and you look for arbitrage. From the

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Question 4: Assume you are a trader in foreign currencies and you look for arbitrage. From the quote screen on your computer terminal, you observe the exchange rate quotations below. (Numbers should be rounded to 4 decimal places. Please note that your answers will be worthy zero mark if they do not include currency symbols, , $, .)

Bank Quotations	Rate
Citi Bank :	$1.8403/
UBS :	$1.3225/
Barclays Bank :	1.3647/

a. Explain what a triangular arbitrage is. What is a condition that will give rise to a triangular arbitrage opportunity? (1.5 marks)

b. What / price will eliminate triangular arbitrage? (1 mark)

c. How you can make a triangular arbitrage profit by trading at these prices? What is the profit? Explain and discuss your calculations. (4 marks)

Posted Date: Jun 24, 2024 02:05 PM

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Question 4: Assume you are a trader in foreign currencies and you look for arbitrage. From the

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