Question
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
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.
| 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?
b. What / price will eliminate triangular arbitrage?
c. How you can make a triangular arbitrage profit by trading at these prices? What is the profit? Explain and discuss your calculations.
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Forecasting Methods And Applications
Authors: Spyros G. Makridakis, Steven C. Wheelwright, Rob J Hyndman
3rd Edition
0471532339, 9780471532330
