Question

Assume that you are a trader with Barclays Bank in London. From the screen on your terminal, you notice that HSBC Bank is quoting $ 1.5150 / £ 1.00. Credit Suisse is quoting SF 1.4150 / $ 1.00. You learn that UBS is making a direct market between Swiss franc and British pound, with a current SF/ £ quote of 2.1625. Assume you have $ 100,000 to conduct the arbitrage.

a) Is there an arbitrage opportunity? Show the required calculations.

b) If your answer to part a is yes, show how you can make a triangular arbitrage profit by trading at these prices explaining each step in the arbitrage process.

c) What should be the equilibrium SF/ £ price to prevent any arbitrage opportunity?

Answer #1

Assume you are a trader with Deutsche Bank. From the quote
screen on your computer terminal, you notice that Dresdner Bank is
quoting €0.855/$1.00 Credit Suisse is offering SF1.1825/$1.00.
UBS’s current direct quoting €/SF currently @ € 0.754/SF
i. Prove and explain whether at these quoted rates there a
chance for triangular arbitrage (Hint: Use the no arbitrage cross
exchange rate here).
ii. Show and explain how you can make a triangular arbitrage
profit by trading at these prices. (Ignore...

Assume you are a currency trader and have an initial SF
12,000,000 to trade. You can buy or sell currencies at the rates
stated below: Mt. Fuji Bank ¥ 92.00/$ Mt. Rushmore Bank SF 1.02/$
Mt. Blanc Bank ¥ 90.00/SF Can you make a profit via triangular
arbitrage? If so, show the steps and calculate the amount of profit
in Swiss francs. [10 marks]

In March 8th 2020, In London 1 $ = £ 0.7656, while in Zurich 1
SF = $1.08, but you found out that at JP Morgan, the cross rate
between CHF and GBP is: 1 SF = £ 0.9264.
If you are a trader at Citibank, and you have USD 1,000,000 for
an arbitrage.
Is there any arbitrage profit that could be made with a
triangular arbitrage action?
Describe an example of how such a profit may be earned (draw...

Swissie Triangular Arbitrage. The following
exchange rates are available to you. (You can buy or sell at the
stated rates.) Assume you have an initial SF 13,000,000. Can you
make a profit via triangular arbitrage? If so, show the steps and
calculate the amount of profit in Swiss francs (Swissies).
Mt Fuji Bank
90.34 Euro/$
Mt. Rushmore Bank
SF 1.02/$
Mt. Blanc Bank
91.97 Euro/SF
Calculate First arbitrage opportunity attempt below:
(Round to the nearest cent)
Attempt number 1: Start...

Suppose you are a currency trader for BRADESCO and you
see the following currency quotes from CITI Bank, ITAU, and CAIXA
Economica Federal Banks.
Bank
Quotation Description
Quote
CITI Bank
Exchange rate of Singapore dollar in U.S. $
$0.32
ITAU
Exchange rate of pound in U.S. $
$1.50
CAIXA Economica Federal Banks
Exchange rate of pound in Singapore dollars
S$4.50
a. (8 pts) Calculate the no arbitrage cross exchange
rate for S$/£, and determine whether there is and arbitrage
opportunity....

1.Suppose that you are a
foreign exchange trader for a bank based in New York. You are faced
with the following market rates:
Spot exchange rate: SFr
0.9845/$.
6 month dollar interest rate =
1.0% per annum
6 month Swiss franc interest
rate = 0.25% per annum
6 month forward exchange rate:
= SFr 0.9785/$
a) Is there a Covered Interest
Arbitrage (CIA) opportunity here? Explain why or why
not.
b) Given the data in part (a), spell out the...

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