Q.1) Two banks are quoting the following US$ rates:
Bank A : 46.7510 – 7630
Bank B : 46.7680 – 7770
Find out the arbitrage opportunities.
(Ans.: He would make profit of $ 107)
Q.2) Two banks are quoting the following US$ rates:
Bank A : USD INR 39.20 / 39.30
Bank B : USD INR 39.40 / 39.50
Find out the arbitrage opportunities.
(Ans.: 2,545 on Investment of 1 million )
Q.3) Two banks are quoting the following US$ rates:
Bank A : 46.7510 – 7670
Bank B : 46.7650 – 7770
Find out the arbitrage opportunities.
(Ans.: There is no arbitrage opportunity)
Q.4) Consider following spot quotations:
USD CHF 1.4950/1.4965 Zurich Bank
CHF USD 0.6690 / 0.6700 Bank of New York
Are there any arbitrage-gains possible?
(Ans.: 1,000,155 SFR. Thus gain of 155 SFr)
Q.5) Following rates are quoted by 3 different dealers:
0.6405 UK£ per US$ Dealer A
2.8606 AU$ per UK£ Dealer B
1.8402 AU$ per US$ Dealer C
Are there any arbitrage-gains possible?
(Ans.: Thus there is a net gain of 436 US$)
Q.6) JPY GBP 0.0052
GBP CHF 2.2832
JPY CHF 0.0130
(Ans.: Yen 94,954)
Q.7) USD/AUD Spot 1.3135/1.3155
USD/CAD Spot 1.4835/1.4855
The above quotes are available in the US market. At the same time CAD/AUD 0.8895/0.8915 is available in Sydney.
Find out the arbitrage opportunities through synthetic mechanism.
(Ans.: Gain 3096 CAD on 1 million CAD)
Q.8) Two banks are quoting the following Euro rates:
Bank A : 47.98 – 48.53
Bank B : 48.64 – 48.83
Find out the arbitrage opportunities. Calculate gains using 1 million.
(Ans.: Possible gains are 2267 Rupees through arbitrage)
Q.9) Two banks are quoting the following US$ rates:
Bank A : 47.9810 – 48.1110
Bank B : 48.0110 – 48.2350
Find out the arbitrage opportunities.
(Ans.: There is no arbitrage opportunity)
Q.10) Consider following spot quotations:
1.4960/1.4975 SFr per US$ Zurich Bank
0.6685/0.6690 US$ per SFr Bank of New York
If there any arbitrage-gains possible, calculate it for USD 1 million.
(Ans.: Thus gain of 76 US $)
Q.11) Following rates are quoted by 3 different dealers:
0.0052 UK £ per ¥ : Dealer A
2.2832 CHF per UK £ : Dealer B
0.0130 CHF per ¥ : Dealer C
Are there any arbitrage-gains possible? Calculate gains on ¥ 1 million.
(Ans.: CHF/¥ 0.0119
Given quote is CHF/¥ 0.0130. Since there is a difference, arbitrage gains are possible)
Q.12) The following quotes are obtained in New York:
GBP USD 1.5275/85
USD CHF 1.5530/35
(1) What do you expect for GBP CHF spot in London?
(2) If London Bank quotes 2.3730/40, can you make arbitrage profits? If so, how?
(Ans.: 1) GBP CHF spot rate is 2.3722 – 2.3745
2) Hence there is no arbitrage opportunity)
Q.13) Consider the following Quotations:
CHF 1.4103/1.4124 (per USD)
USD 0.7066/0.7075 (per CHF)
Calculate possible arbitrage gains, if any.
(Ans.: Gain 728 CHF on Investment of 1 million CHF)
Q.14) Two Banks are quoting US dollar rates as follows:
Bank A: 43.2550/43.5075
Bank B: 43.7525/43.8560
Find out arbitrage possibilities.
(Ans.: Gain 5,631 Rupees on investment of 1 million)
Q.15) Three different Traders are quoting as follows:
Trader A 1.63 CAD per Euro.
Trader B 0.945 CHF per CAD.
Trader C 1.545 CHF per Euro.
Workout arbitrage possibilities.
(Ans.: Gains 3019 Euros on investing 1 million Euros)
Q.16) The spot rate for the French Franc is $ 0.1250 and the three month forward rate is $ 0.1260. Your company is prepared to speculate that the French France will move to $ 0.1400 by the end of three months.
a) Are the quotations given direct or indirect quotations?
b) How could the speculation be undertaken using the spot market only?
c) How would the speculation be arranged using forward markets?
d) If your company were prepared to put $ 1 million at risk on the deal, what would the profit turn out to be if expectations were met? Ignore all interest rate implications.
e) [in chapter 8]
(Ans.: a) Direct)
Q.17) Bank A : 100 INR GBP 1.2450/1.2500
Bank B : 100 INR GBP 1.2530/1.2550
Calculate arbitrage, if any.
(Ans.: INR 2400 on Million)
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