What price will eliminate triangular arbitrage

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Question - Assume you are a trader with BBC Bank. From the quote screen on your computer terminal, you notice that Kong Bank is quoting MYR 0.7627/$1.00 and Lala Bank is offering THB1.1806/$1.00. You learn that King Bank is making a direct market between the Thailand Bhat and Malaysia Ringgit, with a current MYR/THB quote of .6395. Show how you can make a triangular arbitrage profit by trading at these prices. (Ignore bid-ask spreads for this problem.) Assume you have $5,000,000 with which to conduct the arbitrage. What happens if you initially sell dollars for THB? What €/SF price will eliminate triangular arbitrage?

Reference no: EM132755193

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