Question

Assume you have an initial investment amount of $1,200,000. Show how you could make a profit, or incur a loss, in U.S. dollars, using triangular arbitrage. Dealer A. $1.9324/£       Dealer B. QAR 1.9405/£        Dealer C. $0.2667/QAR

Answer 1

Investment amount in $	$/GBP	Amount in GBP
1200000	1.9324	620989.44
Amount in GBP	QAR/GBP	Amount in QAR
620989.44	1.9405	1205030.01
Amount in QAR	$/QAR	Amount in $
1205030.01	0.2667	321381.50
Loss	878618.5
If we invest $ 1200000 and buy GBP, we receive GBP 620989.44 and then we can exchange this amount of GBP to QAR.
We get QAR 1205030.01. Using the exchange rate of $/QAR we get 1205030.01 X 0.2667 = $ 321381.50 which results in a net loss