- Given the following two sets of quotations by two currency
dealers:
Dealer
A Dealer
B
Bid Ask Bid Ask
$1.1284/€ $1.1368/€ $1.1464/€ $1.1590/€
- Show without any calculations whether these two sets of
quotations are out of equilibrium to a degree that would lead to an
arbitrage opportunity in the absence of any transaction costs
beyond the bid/ask spread.
- Prove your point by narrating the trading activities that you
need to perform and calculating arbitrage profit by starting with a
nominal sum of $45 million.