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The following exchange rates are quoted simultaneously in Johannesburg, Frankfurt, Singapore and Paris: Johannesburg: USD / ZAR 1 8 . 8 3 0 0 Frankfurt:
The following exchange rates are quoted simultaneously in Johannesburg, Frankfurt, Singapore and Paris:
Johannesburg: USDZAR
Frankfurt: GBPUSD
Singapore: ZARSGD
Paris: SGDUSD
a Calculate all the possible cross rates in the above and then indicate if there is a possibility for threepoint arbitrage. bSuppose Jay have R million to perform an arbitrage trade. Also, suppose the transaction cost for executing all the arbitrage trades is R If the transaction costs are included, is there still a profitable arbitrage sequence available? Prove the answer by calculating the profit or loss earned from arbitrage if Jay has ZAR million to use.
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