Example 2: Triangular Arbitrage Suppose you are provided with the following exchange rates Market Exchange rate Initial Invesment Sydney USD/JPY: 112,39/45 1.000.000 USD Hongkong EUR/JPY: 120.10/15 100.000.000 JPY NewYork EUR/USD: 1.0704/09 1.000.000 EUR Identify triangular arbitrage opportunity and calculate
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- Consider this (incomplete) table of FX cross-rates CHF Column EUR 1.0043 1.4167 USD USD EUR JPY 110.00 GBP CHF 1.4323 What number should be at the intersection of: Row 0.692 EUR JPY 1.2500 Example: the number at the intersection of Row "JPY" and Column "USD" is "110.00" and represents the number of JPY needed to buy one USD. GBP 2.4000 CHF 96.00Evaluate the arbitrage opportunity with the triangular arbitrage methods for the following currency pairs and identify the preferred direction of trade Bid CHFUSD 1.0178 Ask 1.0202 USDGBP 0.7434 0.7443 CHFGBP 0.6512 0.6534 Please calculate both directions and provide the answers. In your answer below, you could provide a 3x3 table (see the top right corner of the text box) and add the following: Direction 1 Direction 2 Calculation answer answer Edit View Insert Format Tools Table 12pt v Paragraph BTUAV Preferred direction (Y/N) answer answer3. For currency transactions, the spot exchange rate is the rate _______, and the forward exchange rate is the rate _______. A. on that day; today B. at some specified future date; today C. today; on that date D. on that date; at some specified future date 4. The first currency mentioned in an FX quote is called the: A. basis currency B. base currency C. root currency D. terms currency
- A1a Suppose that you observe the following exchange rates:$1.75/£; $.0075/¥; and £.005/¥.Is there cross-rate equality?Suppose you are a customer in the FX market and observe the following quotes for FX spot trades of JPY vs. the USD, USD vs. the EUR and JPY vs. the EUR with three dealers A, B and C: Dealer Currency Pair Bid Ask S(USD/EUR) 1.1074 1.1099 S(UPY/USD) 121.00 121.15 C SUPY/EUR) 133.85 133.95 At these rates: O None of the other answers. O There is no triangular arbitrage opportunity. O There is an arbitrage opportunity and it involves buying JPY and selling EUR with dealer C. O There is an arbitrage opportunity and it involves selling JPY and buying USD with dealer B. O There is an arbitrage opportunity and it involves selling JPY and buying EUR with dealer C.Foreign Exchange Market Current spot rates are as follows: USD/CHF 1.5384/89 USD/SGD 2.3895/05 EUR/USD 0.9678/83 AUD/USD 0.5438/43 What is the two-way price for CHF/SGD? On which side of this price would the customer sell SGD? What is the two-way price for EUR/AUD? On which side of this price would the customer buy EUR? What is the two-way price for EUR/CHF? On which side of this price would the customer buy CHF? What is the two-way price for CHF/AUD? On which side of this price would the customer sell CHF?
- Consider this (incomplete) table of FX cross-rates USD EUR JPY GBP CHF CHF Column JPY What number should be at the intersection of: Row USD EUR JPY GBP CHF 1.2500 Example: the number at the intersection of Row "JPY" and Column "USD" is "110.00" and represents the number of JPY needed to buy one USD. CHF Column JPY 0.0043 0.8727 0.0073 110.00 What number should be at the intersection of: Row 0.104 2.4000 ? 0.0104 96.00Q- hardik Assume the following spot exchange rates: $0.90 per € 1.4 € per € $1.25 per ₤ You have $1000 dollars. Which currencies should you buy in which order so as to engage in triangular arbitrage that produces a profit in dollars at the end?A foward exchange transactions involve ____________ exchange of foreign currencies at ________ rate. Question 21 options: 1) immediate, predetermined 2) immediate, spot 3) future, predetermined 4) future, spot
- Question 2 Consider the following (hypothetical) FX quotations at leading banks: Citibank quotes the USD / Euro rate as Barclays quotes the USD/GBP rate as Deutsche Bank quotes the Euro / GBP rate as USD 1.0820 = 1 Euro USD 1.3114 = 1 GBP Euro 1.2122 = 1 GBP a) Using Cross-rates, come up with a quotation for the Euro / GBP rate. b) Is there an opportunity to make some money through Triangular Arbitrage? Show all your workings.Moore has identified two markets to buy Euros: Market A Market B PB PA PB PA KES128/E KES 130 /E KES 132/E KES134/E Establish the locational arbitrage. Explain spatial arbitrage1) Assume the following exchange rates are indirect quotes, what are the equivalent direct quotes INDIRECT QUOTE DIRECT QUOTE $1=7.15 MXN (spot) ______________ $1=10.12 MXN (forward -30 day) ______________ $1=1.21 EUR _________.83_____ $1=120 JPY _________.0083_____ $1=1.7 CHF ___________.58___ 2) If you were comparing the price of hotel rooms in the above countries, the following would be the price in US dollars: 750 MXN (Spot) = _____________ 325 CHF = ________552.5_____ 650 EUR = _________786.5____ 40,000 JPY = ________4,800,000_____ 3) Suppose the Peso devalued by 15%, the hotel room in Mexico would now sell for __________Mexican Pesos which would equal ___________US dollars. 4) Suppose you exported something from Mexico to the US and were quoted a price (payable immediately) of 20,000 Pesos. What would your receipt in US dollars be? _____________. 5) Suppose you exported something from Mexico to the US and the payment…