Q.1) From following 3 quotes, examine if any arbitrage gains are possible and if yes, calculate the same for USD 1 million.
0.5591 UK Pound per USD
1.4521 Euro per UK Pound
0.8128 Euro per USD
(Ans.: 1,147 $)
Q.2) From following 3 quotes, examine if any arbitrage gains are possible and if yes, calculate the same for SGD 1 million.
64.85 JPY per SGD
0.0113 CHF per JPY
0.7345 CHF per SGD
(Ans.: SGD 2,313/1 million SGD)
Q.3) Following rates are quoted:
55.5000 = 1 Pound in London
45.625 = 1 US$ in Delhi
$ 1.2182 = 1 Pound in New York
Are Arbitrage gains possible?
(Ans.: Yes. 1,448 Gain)
Q.4) The following spot rates are observed in N.Y. Forex market-
In the Frankfurt market the JPY/DEM spot rate is being quoted at 74.65/85.
Is there an arbitrage opportunity? What transaction have to executed to it, if there is?
(Ans.: (a) Cross Rate 76.6667/76.7513, Gain 24,271)
Q.5) (a) In London a dealer quotes:
DEM/GBP Spot 3.5250/55
JPY/GBP Spot 180.80/181.30
(i) What do you expect the JPY/DEM rate to be in Frankfurt?
(ii) Suppose that in Frankfurt you get a quote JPY/DEM spot 51.1530/51.2550, is there an arbitrage opportunity?
(b) Assume there are no transaction costs, what advantage can be drawn from the following quotes:
$ 1.6012 = £ 1 in N.Y.
F Fr 4.9800 = $ 1 in Paris
F Fr 7.8200 = £ 1 in London.
(Ans.: (a) Cross Rates 51.2835/51.4326, Gain 556 (b) Gain 19,690)
Q.6) A New York bank is quoting
USD/GBP: 1.7540/45 and CHF/USD: 1.5700/05
The CHF/GBP quote given by a London Bank is 2.7385/90
Can you make arbitrage gains? How?
(Ans.: Cross Rate 2.7538/2.7554 and Gain 5,396)
Q.7) USD/SEK Spot 6.0340/6.0370
Find out the triangular arbitrage possibilities by using synthetic mechanism.
(Ans.: Cross Rate 1.0320/1.0329 and Gain 3,403)
Q.8) GBP/CHF Spot 4.8360/70
GBP/JPY Spot 190.90/191.30
What do you expect to get for CHF/JPY? Suppose a quote is available for CHF/JPY 39.3360/39.3670, what arbitrage possibility is opened up?
(Ans.: Cross Rate 39.4666/39.5575 and Gain 2,530)
Q.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)
Q.10) The following foreign exchange quotes are available in New York.
AUD 1 = USD 0.7602/0.7613
CAD 1 = USD 0.6732/0.6741
Calculate the cross currency quote for 1 CAD in terms of AUD.
The following quote is available in Zurich.
CAD 1 = AUD 0.8895/0.8915
Compare this with the calculated cross currency quote and state whether arbitrage opportunity exists. Calculate the same (if any) for 1 million CAD. (Oct. 2011)
(Ans.: (a) Cross rate 1 CAD = AUD 0.8843/0.8867 (b) Gain 3,112)
Q.11) Swiss Exporter who sells to Denmark must sell Euros and Purchase Swiss Francs.
Available rates are:
CHF 1.7654 = 1 USD
EUR 1.1918 = 1 USD
EUR 0.6566 = 1 CHF
Should he use CHF EUR quote or cross exchange using USD quotes?
(Ans. Cross exchange rate would be EUR 0.6751 = 1 CHF whereas available rate is EUR 0.6566 = 1 CHF. The exporter has to buy CHF. He will go for cheaper rate. He will choose 0.6566 Rate)
Q.12) Bank X: EUR INR 68.00/68.30
Bank Y: 100 INR EUR 1.4550/1.4600
Calculate arbitrage, if any.