14 years ago 14 years ago

Triangular Arbitrage Illustration 9

by Score Tutorial 14 years ago14 years ago

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Triangular Arbitrage Illustration 9

The following foreign exchange quotes are available in New York.

USD 1 = GBP 0.6542/0.6547

USD 1 = CHF 1.5530/1.5535

Calculate the cross currency quote for 1 GBP in terms of CHF.

The following quote is available in Zurich

GBP 1 = CHF 2.3722/2.3745

Compare this with the calculated cross currency quote and state whether arbitrage opportunity exists. Calculate the same (if any) for 1 million GBP. (March 2011)

(Ans.: (a) Cross rate 1GBP = CHF 2.3721/2.3747 (b) No Arbitrage)

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Triangular Arbitrage Illustration 9

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