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Suppose we observe the following quotes from 3 different banks: Bid Ask Deustche USD/SFr 1.245 1.2455 JP Morgan USD/NZD 0.7845 0.7856 HSBC SFr/NZD 0.7014 0.7025
Suppose we observe the following quotes from 3 different banks:
Bid | Ask | ||
Deustche | USD/SFr | 1.245 | 1.2455 |
JP Morgan | USD/NZD | 0.7845 | 0.7856 |
HSBC | SFr/NZD | 0.7014 | 0.7025 |
Do we have an arbitrage opportunity?
If so, starting with 3 million NZD, how do we make profits and by how much? (15 MARKS)
Show your workings.
In your answer, keep 4 decimal places for exchange rate calculation.
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