Question

Suppose you are given the following exchange rates:

0.0094/0.0098 $/¥

60.7492/60.7512 ¥/CHF

0.5837/0.5841 $/CHF

Find the triangular arbitrage profit and describe the steps involved if you can start with 1 million CHF

Answer 1

Answer-

Given

The following are

Bid/ Ask prices

0.0094 / 0.0098 $/¥

60.7492 / 60.7512 ¥/CHF

0.5837 / 0.5841 $/CHF

We follow up the bid and multiply and down the ask and divide rule

Sarting with 1 million CHF

Converting CHF to $

This is up the bid and multiply
we get 1 million x 0.5837 = 1000000 x 0.5837 = $ 583700

Now we convert $ to ¥

This is down the ask and divide
we get $ 583700  / 0.0098 = ¥ 59561224.49

Now we convert  ¥ back to CHF
This is down the ask and divide rule

we get 59561224.49 / 60.7512 = CHF 980412.3127

We ge an arbitrage loss of CHF 1000000 - 980412.3127 = - CHF 19587.687