Dealer’s bid CAD/BRL = C$0.5250
Interbank CAD/USD = 1.2138/1.2259 BRL/USD = 2.3844/2.4082
Triangular Arbitrage profit on USD1million =?
A. US$31,328. B. US$21,135. C. US$31,315. CAD/BRL = USD/BRL x CAD/USD = 1/2.4082 x 1.2138 = CAD/BRL 0.5040 (0.5250-0.5040)=CAD/BRL 0.021 / 1.2259 = .1713 x 1,000,000 = US$17,130 ? What am I doing wrong?
You know that ask>bid in any quote (Ask for more). So if BRL/USD=2.3844/ 2.4082 then USD/BRL= 0.4152 /0.4194
Can you see what I did there?
Yes, that’s what I did.
What is the correct answer? Is it $10, 866?
Start with 1,000,000 USD
Buy BRL on the market / Sell USD : 1,000,000 USD x 2.3844 = 2,834,400 BRL
Sell BRL to dealer / Buy CAS : 2,834,400 BRL x 0.5250 = 1,251,810 CAD
Sell CAD on the market / Buy USD : 1,251,810 CAD / 1.2259 = 1,021,135.49 USD
Arbitrage profit: 21,135.49 USD
Even if you do it your way it won’t get the right answer.
I know this is from their answer, but can you calculate it with the other method?
These questions are hell.
I am hoping one item set comes from ECO
I really dont want to learn ECO in detail.
It seems like the worst topic so far.
Hi
I have made a youtube video explaining triangular arbitrage in a very straightforward and simple way. Check it out here, and let me know what you guys think and if you found it useful.
I cant post links but search for this vid: CFA Level 2 - Economics | Arbitrage Triangle Explained
Kind Regards
Coenrad
Here is Coenrad’s video:
