1. Suppose at 11am this morning, the following rates are obtained from the FX markets:
In New York €1 =$1.09251
In Frankfurt £1 = €1.1234
In London $1 = £0.85
(a) Determine if there is a currency arbitrage opportunity in this 3-currency situation.
(b) If there is an arbitrage opportunity to be exploited, show how you may be able to capture this profit. YOU NEED TO ILLUSTRATE YOUR PROFITABLE ROAD MAP WITH A NUMERICAL EXAMPLE.
(a) Given,
€1 = $1.09251
£1 = €1.1234 => £1 = €1.1234*$1.09251/€ = $1.22733
$1 = £0.85 => £1 = $1/0.85 = $1.17647
As the above-calculated exchange values do not match, there is indeed an arbitrage opportunity in the given FX market.
(b) Let us assume that we start with $1 and exchange it for £0.85 in the London FX market
Sell £0.85 for obtaining euros in the Frankfurt FX market and obtain £0.85*€1.1234/£ = €0.95489
Sell euros in the New York FX market to obtain back dollars and obtain €0.95489*$1.09251/€ = $1.04323
Therefore, one would be able to obtain $1.04323 from $1 from the arbitrage opportunity. By converting the USD into different currencies, as shown above, the arbitrage can be used to obtain profit from the different FX market exchange rates.
1. Suppose at 11am this morning, the following rates are obtained from the FX markets: In...
1. Suppose at 11am this morning, the following rates are obtained from the FX markets:In New York €1 =$1.09251 In Frankfurt £1 = €1.1234In London $1 = £0.85(a) Determine if there is a currency arbitrage opportunity in this 3-currency situation.(b) If there is an arbitrage opportunity to be exploited, show how you may be able to capture this profit. YOU NEED TO ILLUSTRATE YOUR PROFITABLE ROAD MAP WITH A NUMERICAL EXAMPLE.
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Read the Article posted below, then answer the following
questions:
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corporate diversification strategy, identify and discuss the top
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shareholder value.
What are the five major components of “CEMEX
Way” and why has this approach been so successful in
post-acquisition integration?
In your opinion, what can other companies learn from
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Article:
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