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3. Assuming no transaction costs, suppose the following quotes are available [NY: $1.25961/£, Paris: $1.12952/€, Singapore:...
You specialize in cross-rate arbitrage. You notice the following quotes: Singapore dollar/U.S. dollar (S$/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 $1,000,000 available for this purpose?
Suppose that you are in Singapore with 10,000 Singapore dollars (SGD) and you want to exchange them for euros for your trip to Paris. The exchange shop gives you the following rates: Commission: 1% US...
Suppose that you are in Singapore with 10,000 Singapore dollars (SGD) and you want to exchange them for euros for your trip to Paris. The exchange shop gives you the following rates: Commission: 1% USD/SGD = 1.2375 EUR/USD = 1.2800. How many dollars will you get for your Singapore dollars?
Suppose you observe the following quotes for EUR at two different banks. At Bank X, the...
Suppose you observe the following quotes for EUR at two different banks. At Bank X, the bid is USD 0.330 / EUR and the ask is USD 0.335 / EUR. At Bank Y, the bid is USD 0.315 / EUR and the ask is USD 0.320 / EUR. What is your gain if you use USD 1,000,000 to take advantage of this locational arbitrage opportunity? That is, how much will you end up with over and above the USD 1,000,000...
Cross-Rate Arbitrage 0. Doug Bernard specializes in cross-rate arbitrage. He notices the following quotes. Swiss franc/dollar...
Cross-Rate Arbitrage
0. Doug Bernard specializes in cross-rate arbitrage. He notices the following quotes. Swiss franc/dollar = SFr1.5971/$ Australian dollar/U.S. dollar = A$1.8215/$ Australian dollar/Swiss franc = A$1.1440/SFr Ignoring transaction costs, does Doug Bernard have an arbitrage opportunity based on these quotes? If there is an arbitrage opportunity, what steps would he take to make an arbitrage profit, and how much would he profit if he has $1,000,000 available for this purpose?
BF2207 Question 3 DBS Bank in Singapore and Malayan Banking Berhad (MBB) in Malaysia give quotes...
BF2207 Question 3 DBS Bank in Singapore and Malayan Banking Berhad (MBB) in Malaysia give quotes for Malaysian ringgit (MYR), Singapore dollar (SGD) and Thai baht (THB) as follow: In Singapore at DBS: Spot exchange rate for MYR Spot exchange rate for THB In Malaysia at MBB: Spot exchange rate for SGD Spot exchange rate for THB Bid 0.320 SGD 0.039 SGD Bid 3.147 MYR 0.125 MYR Ask 0.325 SGD 0.042 SGD Ask 3.159 MYR 0.133 MYR Assume that you...
The following are quotes for several U.S. currency dealers. Dealer A B C D E Japanese...
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 Inter-dealer arbitrage 1 a. Is there an arbitrage opportunity in Japanese yen? If so, what exchanges should you make to take advantage of it? (Be specific about which dealer you would select, what currency you would buy from or sell to...
2. Suppose the following exchange rates are available: AUS$1.2452/C$ AUS$1.6984/US$ C$1.5625/US$ Assume you are a Canadian...
2. Suppose the following exchange rates are available: AUS$1.2452/C$ AUS$1.6984/US$ C$1.5625/US$ Assume you are a Canadian trader with C$1,000,000. What will you do? How much is your gain?
1. Suppose you observe the following quotes for Thai baht (in Vietnamese dong) in Bangkok, for...
1. Suppose you observe the following quotes for Thai baht (in Vietnamese dong) in Bangkok, for Czech koruna (in Vietnamese dong) in Ho Chi Minh City, and baht (in Czech koruna) in Prague. Bangkok: dong/baht 649.35062-656.89420 Ho Chi Minh City: dong/koruna 1038.6277 – 1041.6667 Prague: koruna/baht 0.5896 -0.6076 a. Demonstrate that an arbitrage opportunity exists by selecting any two markets and showing that the implied quote does not overlap the actual quote in the third market. b. Suppose you start...
The following are quotes for several U.S. currency dealers. Dealer A B C D E Japanese...
The following are quotes for several U.S. currency dealers. Dealer A B C D E Japanese yen 109.03 109.06 109.04 109.08 109.06 109.10 109.05 109.07 109.07 109.09 British pounds 1.3115 1.3119 1.3118 1.3120 1.3115 1.3118 1.3116 1.3117 1.3115 1.3118 Triangular arbitrage (Inter-market) - assume that the highest bid and lowest ask for each currency are equal (so that the bid-ask spread is zero) 3. The New York spot exchange rate for Canadian dollar (USD/CAD) is 1.2146 and the spot exchange...
The following are quotes for several U.S. currency dealers. Dealer A B C D E Japanese...
The following are quotes for several U.S. currency dealers. Dealer A B C D E Japanese yen 109.03 109.06 109.04 109.08 109.06 109.10 109.05 109.07 109.07 109.09 British pounds 1.3115 1.3119 1.3118 1.3120 1.3115 1.3118 1.3116 1.3117 1.3115 1.3118 Covered interest arbitrage (Inter-temporal) - assume that the highest bid and lowest ask are equal (i.e., that the bid-ask spread is zero) 9. Assume the interest rate of 1-year risk free debt denominated in US dollars is 2.57% and the interest...
Cross-Rate Arbitrage
0. Doug Bernard specializes in cross-rate arbitrage. He notices the following quotes. Swiss franc/dollar = SFr1.5971/$ Australian dollar/U.S. dollar = A$1.8215/$ Australian dollar/Swiss franc = A$1.1440/SFr Ignoring transaction costs, does Doug Bernard have an arbitrage opportunity based on these quotes? If there is an arbitrage opportunity, what steps would he take to make an arbitrage profit, and how much would he profit if he has $1,000,000 available for this purpose?
BF2207 Question 3 DBS Bank in Singapore and Malayan Banking Berhad (MBB) in Malaysia give quotes for Malaysian ringgit (MYR), Singapore dollar (SGD) and Thai baht (THB) as follow: In Singapore at DBS: Spot exchange rate for MYR Spot exchange rate for THB In Malaysia at MBB: Spot exchange rate for SGD Spot exchange rate for THB Bid 0.320 SGD 0.039 SGD Bid 3.147 MYR 0.125 MYR Ask 0.325 SGD 0.042 SGD Ask 3.159 MYR 0.133 MYR Assume that you...
2. Suppose the following exchange rates are available: AUS$1.2452/C$ AUS$1.6984/US$ C$1.5625/US$ Assume you are a Canadian trader with C$1,000,000. What will you do? How much is your gain?
1. Suppose you observe the following quotes for Thai baht (in Vietnamese dong) in Bangkok, for Czech koruna (in Vietnamese dong) in Ho Chi Minh City, and baht (in Czech koruna) in Prague. Bangkok: dong/baht 649.35062-656.89420 Ho Chi Minh City: dong/koruna 1038.6277 – 1041.6667 Prague: koruna/baht 0.5896 -0.6076 a. Demonstrate that an arbitrage opportunity exists by selecting any two markets and showing that the implied quote does not overlap the actual quote in the third market. b. Suppose you start...
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