Question

Assume you are a currency trader and have an initial SF 12,000,000 to trade. You can...

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]

Homework Answers

Answer #1

Solution:-

First we need to calculate Cross rate -

SF/¥ = SF/$ * $/¥

SF/¥ =

SF/¥ = 90.196

Actual Rate = SF/¥ =90

Implied Rate = SF/¥ = 90.196

SF are smaller in actual than implied rate.

So Buy SF and Sell ¥ at SF/¥ 90.

First we sell SF to buy $ -

= $11,764,706

Then Sell $ to buy ¥ -

$ = ¥1,082,352,941

Then Sell ¥ to buy SF-

¥ = SF 12,026,144

Amount of Profit = SF12,026,144 - SF12,000,000 = SF26,144.

Hence, Amount of profit is SF26,144.

If you have any query related to question then feel free to ask me in a comment.Thanks.

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Swissie Triangular Arbitrage. The following exchange rates are available to you.​ (You can buy or sell...
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...
SHOW ALL WORK PLEASE 4. Triangular Arbitrage Riskless profit using 10,000,000 Swiss franc. The following exchange...
SHOW ALL WORK PLEASE 4. Triangular Arbitrage Riskless profit using 10,000,000 Swiss franc. The following exchange rates are available to you. (You can buy or sell at the stated rates.) Mt. Fuji Bank Mt. Rushmore Bank Mt. Blanc Bank ¥120.00/$ SF 1.6000/$ ¥80.00/SF
Assume that you are a trader with Barclays Bank in London. From the screen on your...
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....
Suppose you are a currency trader for BRADESCO and you see the following currency quotes from...
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. You are a foreign exchange trader and  you receive the following two quotes for spot trading:...
1. You are a foreign exchange trader and  you receive the following two quotes for spot trading: - Bank A is willing to trade at $3 per Swiss franc - Bank B is willing to trade at 1 Swiss franc per dollar. Is there an arbitrage opportunity to make profit? (True stands for yes, false stands for no) 2. You are a foreign exchange trader and  you receive the following two quotes for spot trading: - Bank A is willing to trade...
Assume you are a trader with Deutsche Bank. From the quote screen on your computer terminal,...
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...
The following exchange rates are available to you. (You can buy or sell at the stated...
The following exchange rates are available to you. (You can buy or sell at the stated rates.) SGD/USD 1.65 USD/CHY 0.16 SGD/CHY 0.30 Assume you have an initial USD 12,000.  Can you make a profit via triangular arbitrage?  If so, show the steps and calculate the amount of profit in USD.
Can I have your opinion on this research and possible correction? The global economy and government’s...
Can I have your opinion on this research and possible correction? The global economy and government’s ability to control its country’s currency. Definition of terms Global economy is an economic interdependence established between the most influential countries that drives the worldwide economic environment. It is also the aggregate economic output, movement and influence of all countries. (My Accounting course). Currency is the medium of exchange for goods and services. In short, its money, in the form of paper or coins,...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT