- Given the following two sets of quotations by two currency
dealers:
Dealer
A
Dealer B
Bid
Ask
Bid
Ask
$1.1160/€
$1.1390/€
$1.0980/€
$1.1040/€
- Show whether these two sets of quotations are out of
equilibrium to a degree that would lead to an arbitrage opportunity
in the absence of any transaction costs beyond the bid/ask
spread.
- Prove your point by showing the trading activities that you
need to perform starting with a nominal sum of $80 million.