You walk into an international bank with $1,000 and observe the following exchange rates:
Bid Ask
1.98 $/£ 1.99 $/£
1.33 $/Euro 1.35 $/Euro
1.42 Euro/£ 1.44 Euro/£
Can you make money through triangular arbitrage? If you can, show how you would do it and how much money you would make. If not, demonstrate that it is impossible to do it.
When triangular arbitrage is present, it is generally not available for long. If it were present in the above situation, what market forces would cause it to disappear?