You just opened your FX dealer screen on your desk in your bank and observed the following exchange rates quoted by three banks: MUFJ Bank quotes Japanese yen (¥) per Australian dollar (A$) = ¥81/A$; BOT Bank quotes Swiss Franc (SFr) per Australian dollar (A$) = SFr1.1/A$ and HSBC Bank quotes Japanese yen (¥) per Swiss Franc (SFr) = ¥98/SFr.

 Assuming no transaction cost, can you detect any arbitrage opportunity here?

If so, how (i.e., which ways) could you take profitable advantage of the rates? And what will be your arbitrage gains, if any, provided your FX Manager allows you to use A$100,000 for FX trading purpose?

Answer rating: 100% (QA)

To determine if there is an arbitrage opportunity we need to check if there is a possibility of maki... View the full answer