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Refer to the data in the table below. Suppose they are the FX rates quoted by two large banks. By Bank A By Bank B
Refer to the data in the table below. Suppose they are the FX rates quoted by two large banks. By Bank A By Bank B Assume the client will choose the best rate (buy at the lower rate and sell at the higher rate) to deal with either Bank A or Bank B. Fill in the blanks below: Assume now you are a market maker of Bank C. Make a reasonable two-way price quote (i.e. both bid and ask with 10 pips spread) to attract the client to deal with your bank rather than the other two banks in the cases below (don't quote too high or too low, otherwise you will be taken arbitrage opportunity). d. (2 marks) of deal no. c above e. (2 marks) of deal no. d above f. (2 marks) If you are an arbitrageur, explain how you can take an arbitrage profit (and how much profit) from the quotes of Bank A and bank B in USD/CAD
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