As a foreign exchange trader, you see the following quotes for
Canadian Dollars (CAD), U.S. Dollars (USD), and Mexican Pesos
(MXN):
MXN 6.4390/CAD USD 0.7047/CAD MXN 8.7535/USD Is there an arbitrage
opportunity? If so, how would you exploit it if you had 1 million
USD? (11 marks)
Start with 1 million USD
Convert USD to CAD =1/0.7047 million CAD
Convert CAD to MXN=1/0.7047*6.4390 million MXN
Convert MXN to USD=1/0.7047*6.4390*1/8.7535=1.043836353
Profit=1.043836353-1=0.043836353 million USD or 43836.353 USD
As a foreign exchange trader, you see the following quotes for Canadian Dollars (CAD), U.S. Dollars...
Three Exchange Rates are as follows: 1) US Dollars (USD) to Canadian Dollars (CAD) at CAD 1.05 to USD 1 2) CAD to Euros (EUR) at CAD 1.08 to EUR 1 3) EUR to USD at EUR 0.9 to USD 1 Suppose you start with USD 100,000, and do one round of "triangular arbitrage", that is convert make a total of 3 foreign exchange transactions to start from USD and return to USD. What will be your profit in USD?...
The following are quotes for several U.S. currency dealers. Dealer A B C D E Japanese yen 109.03 109.06 109.04 109.08 109.06 109.10 109.05 109.07 109.07 109.09 British pounds 1.3115 1.3119 1.3118 1.3120 1.3115 1.3118 1.3116 1.3117 1.3115 1.3118 Triangular arbitrage (Inter-market) - assume that the highest bid and lowest ask for each currency are equal (so that the bid-ask spread is zero) 3. The New York spot exchange rate for Canadian dollar (USD/CAD) is 1.2146 and the spot exchange...
Derek Jones, a foreign exchange trader at Charles Schwab, can invest $1 million, or the foreign currency equivalent of the bank’s short-term funds, in a covered interest arbitrage with Japan. Using the following quotes, can Derek make a covered interest arbitrage profit? If so, show the steps and calculate the amount of profit in USD. Arbitrage funds available $1,000,000 Spot exchange rate (¥/$) ¥106.00/$ 6-month forward rate (¥/$) ¥103.50/$ US dollar 6-month interest rate 4% Japanese yen 6-month interest rate...
The following are quotes from a currency dealer in the New York
currency market
Using the quotes provided above, answer the following question.
(Phrase your explanation in parts b and d: as “If you sell one
(specify the currency) to the dealer, you will receive
(specify the number of units and the currency)” or “If you
buy one (specify the currency) from the dealer, you will
pay (specify the number of units and the currency)”.)
1. Using the quotes provided...
Question 9 (1 point) Three Exchange Rates are as follows: 1) US Dollars (USD) to Canadian Dollars (CAD) at CAD 1.05 to USD 1 2) CAD to Euros (EUR) at CAD 1.08 to EUR 1 3) EUR to USD at EUR 0.9 to USD 1 Suppose you start with USD 100,000, and do one round of "triangular arbitrage". that is convert make a total of 3 foreign exchange transactions to start from USD and return to USD. What will be...
3. You are given the following exchange rates: Exchange Rates Time 0 Time 1 So Si USD / GBP 1.8558 1.8561 USD/EUR 1.2674 1.2622 CAD / USD 1.3111 1.3129 MXN / USD 10.7575 10.6780 AUD/USD 1.3095 1.3025 ZAR / USD 6.8330 6.8850 Where: GBP = British Pound: CAD Canadian Dollar; MXN - Mexican Peso; AUD = Australian Dollar; ZAR = South African Rand Using the information above: a. Which foreign currencies are directly quoted? b. Which foreign currencies are indirectly...
A foreign exchange trader based in the U.S., authorized to borrow $600,000 or its foreign currency equivalent, faces the following quotes: Spot rate $1.2015/pound Six month forward $1.2241/pound US interest rate 6.10% per annum UK interest rate 5.50% per annum Is covered interest arbitrage possible? a. yes b. no If your answer is yes, how much risk free profit could she earn? Show all steps.
A foreign exchange trader based in the US, authorized to borrow $450,000 or its foreign currency equivalent faces the following quotes: Spot rate: $1.3000/pound Six Month Forward: $1.3085/pound US Interest Rate: 3.0% per annum UK Interest Rate: 2.0% per annum Is covered Interest arbitrage possible, and if so, how much profit can the trader make via 1 covered interest arbitrage transaction? Please show all steps and work.
Assume the following exchange rate: E$/€ = 1.1, E$/CAD = .8, E€/CAD = .75. CAD is the symbol for the Canadian dollar. Explain how you could make money using triangular arbitrage. Be clear – which currency would you buy, and which currency would you convert it into? You should begin and end with dollars. If you had $1,000,000 how much money would you make?
2. Heidi Hoi Jensen, a foreign exchange trader at J.P. Morgan Chase, can invest $5 million, or the foreign currency equivalent of thebank's short term funds, in a covered interest arbitrage with Denmark. Using the following quotes, can Heidi makea covered interest arbitrage (CIA) profit? If yes, then find the arbitrage profit in dollars. Clearly indicate the steps needed to take to realize the arbitrage profit. (Please note that the interest rates are quoted in annual terms, and that the...