Question

Take the following two exchange rates and compute the EUR/INR cross exchange rate. INR12.1225/USD and EUR.8145/USD.

In the question above, if there is a direct cross exchange rate of EUR.066215/INR, is there a triangular arbitrage opportunity? If yes, start with $50,000 and indicate how much triangular arbitrage profit exists for 1 trip around the triangle. Show your work

Answer #1

Exchange rate 1: INR 12.1225/USD

Exchange rate 2: EUR 0.8145/USD

Exchange rate 3: EUR 0.066215/INR

First, let's find the cross rate between INR and EUR from exchange rates 1 and 2

Cross rate = 0.8145/12.1225

Cross rate = EUR 0.06718911116/INR

Yes, there is a triangular arbitrage opportunity as the cross rate is different from the direct cross exchange rate (exchange rate 3)

We follow the three steps below to exploit the opprotunity.

Step 1: Sell $50,000 to buy EUR at exchange rate 2

$50,000 = 50,000 * 0.8145 = EUR 40,725

Step 2: Sell EUR 40,725 to buy INR at exchange rate 3

EUR 40,725 = 40,725/0.066215 = INR 615,041.9089330212

Step 3: Sell INR 615,041.9089330212 to buy USD at exchange rate 1

INR 615,041.9089330212 = 615,041.9089330212/12.1225 = USD 50,735.5668329982

Triangular arbitrage = 50,735.5668329982 - 50,000

Triangular arbitrage = USD 735.5668329982

A. Take the following two exchange rates and compute the EUR/INR
cross exchange rate. INR12.1225/USD and EUR.8145/USD.
B. In question A, if there is a direct cross exchange rate of
EUR.066215/INR, is there a triangular arbitrage opportunity? If
yes, start with $50,000 and indicate how much triangular arbitrage
profit exists for 1 trip around the triangle.

Three Exchange Rates are as follows: 1) US Dollars (USD) to
Canadian Dollars (CAD) at CAD 1 to USD 1.05 2) CAD to Euros (EUR)
at CAD 1.41 to EUR 1 3) EUR to USD at EUR 0.72 to USD 1 Suppose you
start with USD 100,000, and do one round of "triangular arbitrage",
that is convert make a total of 3 foreign exchange transactions to
start from USD and return to USD. What will be your profit in
USD?

Question 10
A currency trader sees the following exchange rates.
1 USD = 1.355 CAD
1 USD = 0.935 EUR
1 EUR = 1.442 CAD
Is the CAD per EUR exchange rate in equilibrium?
Calculations required. Briefly explain. Show your
work. Use 3 decimals.
Question 11
Refer to information provided above (question 10). If the
Treasurer invests 15 million USD, show whether or not it would be
possible to profit from arbitrage?
Calculationsrequired. Show your
work. Use 3 decimals.

You observe the following exchange rate quotes:
$ 1.1830 / EUR
$ 1.5240 / GBP
GBP 0.7815 / EUR
If you start with $ 1 million, what arbitrage profit in dollars
can you make using triangular arbitrage?
Please show work

Construct cross-rate for bid & ask prices
IF dollar-euro exchange rate is USD1.25 = EUR1.00 and the
dollar-Yen exchange rate is JPY200 = USD1.00. What is the EUR-JPY
cross rate?
USD equivalent
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BID
ASK
Switzerland (Franc) CHF
$0.65/CHF
$0.68/CHF
Euro €
$1.15/€
$1.2/€
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Helen Depp, who trades at an FX cubicle in a big bank in UK
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per euro.
$1.2195/€ or €0.82/$
$1.2262/£ or
£0.8155/$...

Suppose the following prevailed in the foreign currency market:
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(USD) interest rates 0.0075 (75 basis points or three fourths of
one percent) € (EUR) interest rates 0.0010 (10 basis points or one
tenth of one percent ) Use these data to answer the following three
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Question 12 (1 point) What is the forward premium/discount of
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Assume the following information:
Exchange rate of Singapore dollar in USD = 0.32 USD/SGD
Exchange rate of pound in USD = 1.45 USD/GBP
Exchange rate of pound in Singapore dollars = 4.88 SGD/GBP
If you have 1 million USD to conduct one cycle of triangular
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Assume the following information:
Exchange rate of Singapore dollar in USD = 0.32 USD/SGD
Exchange rate of pound in USD = 1.49 USD/GBP
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If you have 1 million USD to conduct one cycle of triangular
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Assume spot FX rates of $1.3754/Euro and $1.6561/BP. What should
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