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Author Topic: Homework Triangular Arbitrage- Christopher K.  (Read 1129 times)

Offline Christopher

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Homework Triangular Arbitrage- Christopher K.
« on: February 24, 2010, 08:00:44 pm »
London:
1 Dollar = 90,18 Yen
1 Dollar = 0,738 Euro


Implied Rate: 90,18 Yen / 0,738 Euro

      1Euro = 122,195122 Yen

Japan:

1 Euro = 140,39 Yen

Euro is expensive in Japan and cheap in London


1. Change 1 000 000 Euros into Yen in Japan:

      1 000 000 Euro x 140,39 Yen/Euro = 140 390 000 Yen

2)Change Yen into Dollar in London:

      140 390 000 Yen / 90,18 Yen/Dollar = 1 556 775,338 Dollar

3)Change Dollar into Euro in London

      1 556 775,338 Dollar x 0,738 Euro/Dollar = 1 148 900,2 Euro

4)Arbitrage Profit:

      1 148 900,2 - 1 000 000 = 148 900,2 Euro