In: Finance
Assume you are a trader with China Bank. From the quote screen
on your computer
terminal, you notice that Maybank is quoting RM_________/$1.00
(please refer to your
assigned rate in the given table) and CIMB Bank is offering
SGD___________/$1.00
(please refer to your assigned rate in the given table) . You learn
that Public Bank is
making a direct market between Malaysian ringgit and Singapore
dollar, with a current
RM/SGD quote of 3.015.
Show how you can make a triangular arbitrage profit by trading at
these prices. (Ignore
bid-ask spreads for this problem.) Assume you have RM1,000,000 with
which to
conduct the arbitrage.
What RM/SGD price will eliminate triangular arbitrage?
Given rate for RM/USD | Given rate for SGD/USD |
4.00 | 1.20 |