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What are cross-rates and triangle arbitrage typically used for?

What are cross-rates and triangle arbitrage typically used for?

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Answer #1

1. Cross rates are the exchange rates which includes multiple currencies where the direct quote between the currencies are not available. Through triangular arbitrage, currencies can be equalized in different quotes

2. A triangular trading is a strategy which expolits the arbitrage trades mainly between three currencies. If there is an discrepancy in the direct quotes provided by the market. It happens when exchange rate of a currency does not match with cross exchchange rate of the currencies. This situation generally arises from the undervaluation and overvaluation of the currencies.

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