Question
Triangular Arbitrage Assume the following information: QUOTED PRICE Value of Canadian dollar in U.S. dollars $.92 Value of New Zealand dollar in U.S. dollars $.30
- Triangular Arbitrage Assume the following information:
QUOTED PRICE
Value of Canadian dollar in U.S. dollars $.92
Value of New Zealand dollar in U.S. dollars $.30
Value of Canadian dollar in New Zealand dollars NZ$ 3.02
Given this information, is triangular arbitrage possible? If so, explain the steps that would reflect triangular arbitrage, and compute the profit from this strategy if you had $2 million to use. What market forces would occur to eliminate any further possibilities of triangular arbitrage?
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Pricing And Hedging Financial Derivatives A Guide For Practitioners
Authors: Leonardo Marroni, Irene Perdomo
1st Edition
1119953715, 978-1119953715
