Triangular arbitrage is a trading strategy that takes advantage of pricing discrepancies among three currencies to...

 

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Triangular arbitrage is a trading strategy that takes advantage of pricing discrepancies among three currencies to make a profit. Mr. Paul w an investment of $100,000 is interested in triangular arbitrage. The RHB bank is quoting rates (as given below) for Euro, Australian dollar and US dollar; Currency Bank buy Australian dollars for Bank sell Australian dollars for Bank buy Australian dollars for Bank sell Australian dollars for Bank buy dollars for Bank sell dollars for $0.61 $0.65 0.70 euros per A$ 0.73 euros per A$ 0.92 euros per dollar 0.94 euros per dollar Calculate the profit or loss if Mr. Paul was to attempt triangular arbitrage by converting U.S. dollars to Australian dollars, then converting Australian dollars to euros, and then converting euros to U.S. dollars. Show your calculations in the form of a triangle. State whether Mr. Paul should be involved in the triangular arbitrage transaction or not? Justify your answer. (12 mar Triangular arbitrage is a trading strategy that takes advantage of pricing discrepancies among three currencies to make a profit. Mr. Paul w an investment of $100,000 is interested in triangular arbitrage. The RHB bank is quoting rates (as given below) for Euro, Australian dollar and US dollar; Currency Bank buy Australian dollars for Bank sell Australian dollars for Bank buy Australian dollars for Bank sell Australian dollars for Bank buy dollars for Bank sell dollars for $0.61 $0.65 0.70 euros per A$ 0.73 euros per A$ 0.92 euros per dollar 0.94 euros per dollar Calculate the profit or loss if Mr. Paul was to attempt triangular arbitrage by converting U.S. dollars to Australian dollars, then converting Australian dollars to euros, and then converting euros to U.S. dollars. Show your calculations in the form of a triangle. State whether Mr. Paul should be involved in the triangular arbitrage transaction or not? Justify your answer. (12 mar

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Triangular arbitrage is the process of converting one currency to another then converting that second currency to a third and finally converting the t... View the full answer