Explin the triangular arbitrage, Financial Management

Assignment Help:

What is triangular arbitrage?  What is a condition that will give increase to a triangular arbitrage opportunity?

Answer:  Triangular arbitrage is the method of trading out of the U.S. dollar into a second currency, after that trading it for a third currency that is in turn traded for U.S. dollars.  The aim is to earn an arbitrage profit through trading from the second to the third currency while the direct exchange among the two is not in alignment along with the cross exchange rate.

So many, but not all, currency transactions undergo the dollar. Some certain banks specialize in making a direct market among non-dollar currencies, pricing at a narrower bid-ask spread as compared to the cross-rate spread. However, the implied cross-rate bid-ask quotations impose a discipline on the non-dollar market makers.  If their direct quotes are not constant along with the cross exchange rates, a triangular arbitrage profit is possible.


Related Discussions:- Explin the triangular arbitrage

State about investment decision, State about Investment decision Dec...

State about Investment decision Decisions relating to investment in both current and capital assets. Finance manager has to evaluate different capital investment proposalsan

Define the tactics of shareholders used after the bid, After the bid Ta...

After the bid Tactics can be undertaken by directors to ensure that their shareholders don't accept the bid, if that is what they desire. Reject Share

Explain the term finance companies, Finance companies Finance companies...

Finance companies Finance companies make loans to individuals as well as corporations by providing consumer lending business lending also mortgage financing. A few of their loa

Leverage, evaluate the importance of leverage in financial management of a ...

evaluate the importance of leverage in financial management of a small scale company

Net present value (npv), Net Present Value (NPV) In corporate finance, ...

Net Present Value (NPV) In corporate finance, the current value (the value of cash to be received in the future expressed in today's dollars) of an investment in excess of the

Budget classification on the basis of functions, ON THE BASIS OF FUNCTIONS ...

ON THE BASIS OF FUNCTIONS •Functional / Subsidiary budgets: A subsidiary budget is a budget of income or expenditure appropriate to or the responsibility of functions, like

Expected monthly return, In this exercise you will construct efficient port...

In this exercise you will construct efficient portfolios with 5 risky assets using Excel's non-linear optimization routing "Solver". The questions are designed to be sequential and

Explain pro forma financial statements management goals, Explain how manage...

Explain how management goals are incorporated into pro forma financial statements. Management put a target goal and forecasters makes pro forma financial statements under the

Determine current cost of equity, Your task is to determine CDW's current c...

Your task is to determine CDW's current cost of equity. Since the company is not yet publicly traded , you need to estimate its cost of equity from a set of comparable companies. U

Investment strategy of hedge funds, Investment Strategy OF HEDGE FUNDS ...

Investment Strategy OF HEDGE FUNDS After the Funds are raised from genuine investors, the next step for Hedge Funds is to invest them as per the investment objectives and strat

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd