Jim Waugh specializes in cross-rate arbitrage. At a point in time, he noticed the following quotes: U.S.
Question:
U.S. dollar in Swiss francs = SFr 1.5971 per $
U.S. dollar in Australian dollars = A$1.8215 per $
Swiss franc in Australian dollar = A$1.1450 per SFr
Ignoring transaction costs, did Jim Waugh have an arbitrage opportunity based on these quotes? If there was an arbitrage opportunity, what steps would he have taken to make an arbitrage profit, and how much would he have profited with $1 million available for this purpose?
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a The implicit cross rate between Australian dollars and Swiss francs is SFrA A SFr A SFr 1821515971 ...View the full answer
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