Suppose you are a customer in the FX market and observe the following quotes for FX...
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Suppose you are a customer in the FX market and observe the following quotes for FX spot trades of EUR vs. the CHF, CHF vs. the HUF and CHF vs. the HUF with three dealers A, B and C: Dealer A B C Currency Pair Bid S(HUF/EUR) 365.05 S(CHF/EUR) 1.111 S(HUF/CHF) 328.85 At these rates: None of the other answers. Ask 365.45 1.1125 329.00 0 There is a triangular arbitrage opportunity and it involves selling EUR and buying CHF with dealer B. There are no triangular arbitrage opportunities. There is a triangular arbitrage opportunity and it involves selling EUR and buying HUF with dealer A. There is a triangular arbitrage opportunity and it involves buying EUR and selling CHF with dealer B. Suppose you are a customer in the FX market and observe the following quotes for FX spot trades of EUR vs. the CHF, CHF vs. the HUF and CHF vs. the HUF with three dealers A, B and C: Dealer A B C Currency Pair Bid S(HUF/EUR) 365.05 S(CHF/EUR) 1.111 S(HUF/CHF) 328.85 At these rates: None of the other answers. Ask 365.45 1.1125 329.00 0 There is a triangular arbitrage opportunity and it involves selling EUR and buying CHF with dealer B. There are no triangular arbitrage opportunities. There is a triangular arbitrage opportunity and it involves selling EUR and buying HUF with dealer A. There is a triangular arbitrage opportunity and it involves buying EUR and selling CHF with dealer B.
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To determine if there is a triangular arbitrage opportunity we need to check if the cross exchang... View the full answer
Related Book For
International Finance Putting Theory Into Practice
ISBN: 978-0691136677
1st edition
Authors: Piet Sercu
Posted Date:
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