You visited the foreign exchange trading room of a major bank when a trader asked for quotes of the euro from various correspondents and heard of the following:

€:$ quoted by Bank A: 1.1210‒15 (note that the first number is the bid rate or 1.1210$/€, the second number is the ask rate or 1.1215$/€)

€:$ quoted by Bank B: 1.1212‒17.

€:$ quoted by Bank C: 1.1216‒21.

Given the above rates, is there an arbitrage opportunity assuming no transaction costs? How are you going to exploit this arbitrage opportunity?

Answer rating: 100% (QA)

In the given case there is only one arbitrage possibility presen... View the full answer