TWO POINT ARBITRAGE:
Q.1) The buying rate for SFr spot in New York is $0.7884.
A corporate treasurer is going to buy SFr in Zurich at 1.2589 SFr per $ and sell them in New York. Would you advise to go ahead on this transaction?
(Ans.: No. Loss 0.0075$ / $ OR Loss of 7483 $/1 million$)
Q.2) Two banks are quoting following US dollar rates:
Bank A: 47.7530/7610
Bank B: 47.7650/7730
Find out the arbitrage possibilities. Calculate it for 1 million USD.
(Ans.: 83.7503 $)
Q.3) In London, a dealer quotes:
DM per UK Pound Spot 3.5250/55.
¥ per UK Pound Spot 180.0080/181.0030.
What do you expect the ¥ per DM rate in Frankfurt?
If in Frankfurt you get a quote ¥ per DM spot 51.1530/51.2550, is there an arbitrage opportunity?
(Ans.: 51.0589 – 51.3484, No arbitrage opportunity)
Q.4) Two banks are quoting following US$ rates:
Bank A: 44.1025/44.2050
Bank B: 44.3075/44.4000
Find out arbitrage gain in Rupees per one mil US$ investment.
(Ans.: 2,318)
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