Question 5: Exchange

A) foreign exchange trader with a US bank took a short possition of 5 million pounds, when the GBP:USD exchange rate was 1.45. Exchange rate changed to 1.51. How much did the banks liability change because of the change in exchange rate?

b) A newpaper provided following pidpoint spot exchange rates. Compute all the cross exchange rates based on these quotes :$ = 0.9119 $:SFr = 1.5971 $: = 128.17

c) Exchange trading room has a quotes of the euro from various correspondents and heard the following: Bank A 1.1210-15 Bank B 12-17 What does these quotes mean?

d) Does dollar exchange rate of the british pound or the polish zloty has a higher percentage bid-ask spread, and why?

e) Are these quotes reasonable, or is there an arbitrage opportunity: USD:JPY Bank A 121.15-121.25 Bank B 121.30-121.35 Bank C 121.15-121.35

f) At certain point euro is quoted as EUR:USD = 1.1610-1.1615 and Swiss Franc is quoted as USD:CHF = 1.4100-1.4120 What is the implicit EUR:CHF quotation?

g) $:SFr = 1.5960-70 $:AUD = 1.8225-35

Australian firm asked the bank for A$:SFr quote. What cross rate would the bank have quoted?