Suppose that Cloudastries Bank is a U.S.-based financial intermediary that serves the foreign exchange market. Assume...
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Suppose that Cloudastries Bank is a U.S.-based financial intermediary that serves the foreign exchange market. Assume that this bank is willing to both purchase and sell currency for the same rate. In other words, assume there is no bid/ask spread. Suppose Cloudastries has made the following direct quotations: Currency Dollar Spot Rate Mexican Peso $0.60 $1.80 Euro Additionally, Cloudastries has quoted a cross exchange rate of 1 euro = 3.04 pesos. After exchanging dollars for euros, the next step in triangular arbitrage is to exchange those euros for pesos. If you use all 11,111.11 to purchase pesos from Cloudastries, you would receive pesos. Suppose that Cloudastries Bank is a U.S.-based financial intermediary that serves the foreign exchange market. Assume that this bank is willing to both purchase and sell currency for the same rate. In other words, assume there is no bid/ask spread. Suppose Cloudastries has made the following direct quotations: Currency Dollar Spot Rate Mexican Peso $0.60 $1.80 Euro Additionally, Cloudastries has quoted a cross exchange rate of 1 euro = 3.04 pesos. After exchanging dollars for euros, the next step in triangular arbitrage is to exchange those euros for pesos. If you use all 11,111.11 to purchase pesos from Cloudastries, you would receive pesos.
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In triangular arbitrage you start with a base currency in this cas... View the full answer
Related Book For
Spreadsheet Modeling & Decision Analysis A Practical Introduction to Management Science
ISBN: 978-0324656633
5th edition
Authors: Cliff T. Ragsdale
Posted Date:
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