2. Assume you are a trader with Deutsche Bank. From the quote screen on your computer terminal, you notice that Dresdner Bank is quoting ?1.0342/$1.00 and Credit Suisse is offering SF1.5030/$1.00. You learn that UBS is making a direct market between the Suisse franc and the euro, with a current ?/SF quote of 0.6750. You therefore came up with the following: Dresdner Bank: ?1.0342 = $1.00 Credit Suisse: SF1.5030 = $1.00 UBS: ?0.6750 = SF1.00 Assume you have $1,500,000 with which to conduct an arbitrage. 1. Show that triangular arbitrage is possible. Then, explain the steps that would reflect triangular arbitrage, and compute the profits from this strategy.
Paper#4161 | Written in 18-Jul-2015Price : $25