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Offline Matylda

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Triangular Arbitrage
« on: May 14, 2009, 11:25:36 am »
Please find attached my homework. Sorry for the late hand over.

Best regards,
Matilda Taberski
 
Triangular Arbitrage - Homework

$-based spot market quotes in LSE
 $ 1 = ¥ 95.51
 $ 1 = € 0.7351
Quoted rates


1.)  implied rate

1 $ / 1 $ = ¥ 95.51 / € 0.7351
<=> 1 = ¥ 95.51 / € 0.7351      | * 0.7351 €
<=> € 0.7351 = ¥ 95.51           | / 0.7351
<=> € 1  = ¥ 95.51/0.7351
<=> Implied rate: € 1 = ¥ 129.9279


Tokyo Spot Market

Quoted rate

€ 1 = ¥ 129.46

Euro is more expensive in London ¥ 129.9279 is more than ¥ 129.46 for a Euro


2.) arbitrage (buy cheap Euro in Tokyo, sell expensive Euro in London)

Sell 1,000,000 Euro in London to obtain Dollars $:

€ 1,000,000 * 1.3585 $/€ = $ 1,358,500

Convert the amount to Yen in London ($1 = ¥ 95.45) :

$ 1,358,500 * 95.45 ¥/$ = ¥ 129,668,825

Sell Yen in Tokyo to obtain Euro:

¥ 129,668,825 / 129.46 ¥/€ = € 1,001,613.047

Arbitrage Profit:

   € 1,001,613.047 - € 1,000,000 = € 1,613.047


Today (13.05.2009) you can make an Arbitrage Profit of € 1,613.047.

 













Spot Market London:

1$ = 0,7351 Euro
1$ = 96,04 Yen

 Implied Rate: 130,64 Yen/Euro

Spot Market Tokyo:

1€ = 131,34 Yen

 Sell expensive Euro in Tokyo, buy cheap Euro in London!

Interest Rate: 52,9%

Task 3) Look up Cross Market Exchange Rates:

$ vs. ¥: $ 1 = 95,80 ¥       13.05   
$ vs € : $ 1 =  0,73410 €         13.05   

 Implied Rate: 95,80Yen/0,7341 Euro = 130,5 Yen/Euro or 1€ = 130,5 Yen


« Last Edit: July 30, 2009, 09:06:34 pm by Ted Azarmi »

Offline shann

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Re: Triangular Arbitrage
« Reply #1 on: July 30, 2009, 07:25:04 pm »
Hello Mr.Azarmi,
my homework is attached.
Sorry for the lateness...