Question

Using the following quotations: USD / KRW 1187.04 / 1187.39 USD / SGD 1.3687 / 1.3691 SGD / KRW 866.840 / 867.570 (US Dollar, Korean Won, Singapore Dollar) With 1000 USD, look for triangular arbitrage opportunities. What are the results of your attempts? NOTE: You must check two different alternatives – answer as part (a) and then part (b). Answer is to be in USD (how much currency do you have after the series of transactions). You must be accurate to 2 decimal places (any rounding along the way may be penalised).

Answer 1

Alternate 1 USD-------->SGD-------->KRW--------->USD

Alternate 2 USD-------->KRW-------->SGD--------->USD

Alternate 1 To find Triangular arbitrage Let's Make following transactions;

Step 1 Exchange USD for SGD = $1000 X SGD 1.3687(Bid rate) = SGD 1368.7

Step 2 Convert SGD into KRW = SGD 1368.7 X KRW 866.840 (Bid Rate) = KRW 1186443.900

Step 3 Convert KRW into USD = KRW 1186443.900 / KRW 1187.39(Ask Rate) = $999.2032

Step 4 Profit ( In USD) = $999.20 - $1000( original amount) = ($.7968) Loss

Alternate 2 To find Triangular arbitrage Let's Make following transactions;

Step 1 Exchange USD for KRW = $1000 X KRW 1187.04(Bid rate) = KRW 1187040

Step 2 Convert KRW into SGD = KRW 1187040 / KRW 867.570 (Ask Rate) = SGD 1368.2354

Step 3 Convert SGD into USD = SGD 1368.2354 / SGD 1.3691 (Ask Rate) = $999.3685

Step 4 Loss( In USD) = $999.3685 - $1000( original amount) = ($.6315)

There is no triangular arbitrage opportunities