Question

Swissie Triangular Arbitrage. The following exchange rates are available to you.​ (You can buy or sell at the stated​ rates.) Assume you have an initial

SF 12,100,000.

Can you make a profit via triangular​ arbitrage? If​ so, show the steps and calculate the amount of profit in Swiss francs​ (Swissies).

Mt. Fuji Bank	¥91.78/$
Mt. Rushmore Bank	SF 1.09/$
Mt. Blanc Bank	¥91.12/SF

Answer 1

We can make profit by triangular arbitrage.

Initial amount= SF 12,100,000.

Various quotes are

¥91.78/$

SF 1.09/$

¥ 91.12/SF

Step 1. Buy ¥ with the SF : 12,100,000× 91.12= 1102552000

Step 2. Sell this for $: 1102552000÷91.78= 12012987.58

Step 3. Buy SF with the above $ : 12012987.58×1.09= 13094156.46

Now, the profit is the amount of difference from the initial amount.

Profit= 13094156.46-12100000= SF 994,156.46