Geographical Arbitrage Sums
(1) Bank A GBP USD 1.6920 1.6940
Bank B GBP USD 1.6880 1.6900
Calculate Arbitrage, if any.
(Ans.: 1,183)
(2) Bank X EUR CHF 1.4790 1.4820
Bank Y CHF EUR 0.6700 0.6720
Calculate Arbitrage, if any.
(Ans.: 4,113)
(3) City Bank CAD AUD 0.9530 0.9550
Barclays CHF EUR 1.0500 1.0520
Calculate Arbitrage, if any.
(Ans.: 650)
(4) HSBC USD INR 50.00 50.20
SBI 100 INR USD 2.01 2.02
Calculate Arbitrage, if any.
(Ans.: 5,000)
(5) SBI offers USD INR 52
Amex Bank offers 100 INR USD 1.9279
Calculate Arbitrage, if any.
(Ans.: 2,508)
(6) Standard Chartered offers 1 Euro = Pound 0.80 in Spot Market. HSBC just reciprocates the same rate to quote 1 Pound in terms of Euro; by inversing it.
(i) Calculate the rate quoted by HSBC
(ii) As per forex dealer of Standard Chartered; Euro is at 2% premium per annum. What will be rate for 1 Euro after 1 year as per Standard Chartered?
(iii) As per forex dealer of HSBC; Pound is at 2% discount per annum. What will be rate for 1 Pound after 1 year as per HSBC?
(iv) Is there any arbitrage possibility on 1 year rates of the two banks? Calculate it for a million of currency amount.
(Ans.: (i) 1.25 (ii) 0.8160 (iii) 1.2250 (iv) 400)
(7) Chess Bank offers $ 1 = £ 0.625 in Spot Market.
Sakura bank just reciprocates the same rate to quote £ 1 in terms of $; by inversing it.
(i) Calculate the rate quoted by Sakura Bank
(ii) As per forex dealer of Chess Bank; $ will be at 2% premium per annum. What will be rate for $ 1 after 1 year as per Chess Bank?
(iii) As per forex dealer of Sakura Bank; £ will be at 2% discount per annum. What will be rate for £ 1 after 1 year as per Sakura Bank?
(iv) Is there any arbitrage possibility on 1 year rates of the two banks? Calculate it for a million of currency amount.
(Ans.: (i) 1.60 (ii) 0.6438 (iii) 1.5520 (iv) 900)
55 Comments