Given the following exchange rate quotes, find and calculate triangular arbitrage opportunity and its profit level,...

Transcribed Image Text:

Given the following exchange rate quotes, find and calculate triangular arbitrage opportunity and its profit level, then set up the strategy. Citi Bank: £0.85/$ British Bank: *130/£ Japanese Bank: ¥120/S (1) 6 points: Start the trading with $1000, try to calculate the possible triangular arbitrage profit. (MUST show your work for credit) (2) 2 points: Describe the sequence of the 3 banks that you need to trade with in order to earn this arbitrage profit. That is to identify which of these 3 banks should you trade with $1000 firstly, which bank should you trade with next, and which one is the last bank you trade with. Given the following exchange rate quotes, find and calculate triangular arbitrage opportunity and its profit level, then set up the strategy. Citi Bank: £0.85/$ British Bank: *130/£ Japanese Bank: ¥120/S (1) 6 points: Start the trading with $1000, try to calculate the possible triangular arbitrage profit. (MUST show your work for credit) (2) 2 points: Describe the sequence of the 3 banks that you need to trade with in order to earn this arbitrage profit. That is to identify which of these 3 banks should you trade with $1000 firstly, which bank should you trade with next, and which one is the last bank you trade with.