If bank X is quoting “A $1.5838/ bid and A $1.1682/€ ask” and bank Y is quoting “A $1.1684/€ bid and A $1.1690/€ ask”. If you buy € 2million from X at it’s A $1.1682/€ ask price and simultaneously sell € 2million to Y at it’s A $ 1.1684/€ bid price. Calculate arbitrage profit.

International Financial Management
14th Edition
ISBN:9780357130698
Author:Madura
Publisher:Madura
Chapter5: Currency Derivatives
Section: Chapter Questions
Problem 1BIC
Question
100%
If bank X is quoting “A $1.5838/ bid and A $1.1682/€ ask” and bank Y is quoting “A
$1.1684/€ bid and A $1.1690/€ ask”. If you buy € 2million from X at it’s A $1.1682/€
ask price and simultaneously sell € 2million to Y at it’s A $ 1.1684/€ bid price. Calculate
arbitrage profit.
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