--%>
Assignment Help - homework help

What is Triangular arbitrage

What is meant by the Triangular arbitrage?  Explain about the condition which provides rise to opportunity of the triangular arbitrage?

E

Expert

Verified

Triangular arbitrage is defined as the procedure of trading out of the U.S. dollar into the second currency, then trading it for the third currency, which is then traded for the U.S. dollars. Aim is to earn an arbitrage profit through trading from second to the third currency when direct exchange between two is not in the alignment along with the cross exchange rate.

Mostly, though not all, currency transactions should go through the dollar.  Some of banks specialize in forming direct market between the non-dollar currencies, pricing at narrower bid-ask spread rather than the cross-rate spread.  Nonetheless, implied cross-rate bid-ask quotations force a discipline over non-dollar market makers.  In case their direct quotes are not in consistent with cross exchange rates, a triangular arbitrage profit is really possible.

   Related Questions in Financial Accounting

  • Q : Cash flows from operating activities A

    A financial analysis tools that measures the need for financing. The formula is the cash-flow from operating activities divided by the cash paid for long-term asset. Cash paid for long-term assets can be found on the statement of cash-flow, in the investing-activities

    		•
  • Q : Screening of Elder Abuse What is the

    What is the aim of the research in the screening of elderly abuse at the primary health care level ?

    		•
  • Q : Architectural Symbolism-house-style

    Wriet a report on the term Architectural Symbolism:a study of house-style meanings ?

    		•
  • Q : Proceeds on disposal The following

    The following information is taken from the financial statements of an entity: 20x4 20x3 Property, plant and equipment $4,600,000 $4,200,000 Accumulated depreciation (1,800,000) (1,350,000) Depreciation expense 560,000 Gain on disposal of PPE 65,000 The asset disposed of had a cost

    		•
  • Q : Concessionary loan with APV model State

    State nature of the concessionary loan and explain how it is handled within the APV model?

    		•
  • Q : What is Capital Capital : In easy word,

    Capital: In easy word, capital signifies the amount or asset that is invested in business by businessman or owner of business. Whenever the business is closed, after paying exterior creditors, balance amount will be his capital that he can attain.

    		•
  • Q : What is Treasury bills What is Treasury

    What is Treasury bills? What did they do?

    		•
  • Q : Cost accountant With Black

    Black Manufacturing Company Black Manufacturing produced a single product called the Great Beast. During the past three weeks, Lee High, the new cost accountant, had observed that production efficiency and input pr

    		•
  • Q : Non-tradable asset Assume there is

    Assume there is non-tradable asset along with the perfect positive correlation with a portfolio T of the tradable assets.  How will non-tradable asset be priced?

    		•
  • Q : Balance of payments deficit or surplus

    Describe how country may run an overall balance of payments deficit or surplus.

    		•