Question
Three commercial banks quote the following exchange rates simultaneously. Barclay: GBP/USD=1.9250-1.9450 Citibank: EUR/USD=0.8640-0.8830 Deutsche bank: EUR/GBP=0.4210-0.4325 Based on these quoted exchanges, there is an opportunity
Three commercial banks quote the following exchange rates simultaneously.
Barclay: GBP/USD=1.9250-1.9450
Citibank: EUR/USD=0.8640-0.8830
Deutsche bank: EUR/GBP=0.4210-0.4325
Based on these quoted exchanges, there is an opportunity to undertake (hint: specify the name of the strategy) ___________________________________ Starting with USD1 the riskless profit can be earned from the following procedure:
1. Sell _____$1_____ Buy ____________ with ______________ at the rate ______________
2. Sell ____________ Buy ____________ with ______________ at the rate ______________
3. Sell ____________ Buy ____________ with ______________ at the rate ______________
The arbitrage profit is USD__________________
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Financial Institutions Management A Risk Management Approach
Authors: Anthony Saunders, Marcia Cornett
7th Edition
0073530751, 9780073530758
