You specialize in cross-rate arbitrage. You notice the following quotes: Singapore dollar/U.S. dollar (S$/S) spot rate...
You specialize in cross-rate arbitrage. You notice the following quotes:
Singapore dollar/U.S. dollar (S$/S) spot rate = S$1.60/$
Canadian dollar/U.S. dollar (CD/$) spot rate = CD1.33/$
Singapore dollar/Canadian dollar (S$/CD) spot rate = S$1.15/CD
Ignoring transaction costs:
A) Do you have an arbitrage opportunity based on these
quotes?
B) If an arbitrage opportunity exists, what transactions would you
undertake to secure the arbitrage profit?
C) How much would your profit be if you have $1,000,000 available
for this purpose?
Homework Answers
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You specialize in cross-rate arbitrage. You notice the following
quotes:
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