Question
In: Finance
Inspired by his recent trip to the Halong Bay (in Vietnam) and Preah Vihear Temple (in...
Inspired by his recent trip to the Halong Bay (in Vietnam) and Preah Vihear Temple (in Cambodia), Citibank trader Eric Loepp wonders if he can make an intermarket arbitrage profit using Cambodian riel and Vietnamese dong. He works on the Korean desk so his primary currency is wrong. He has ₩100,000,000 to work with so he gathers the following quotes: Citibank quotes Cambodian riel per Korean Wong: CMR 1.9324 = KWG 1.00
National Bank of Vietnam quotes Cambodian riel per Vietnamese Dong: CMR 2.7506 = VDG 1.00
Nomura quotes Vietnamese Dong per Korean Wong: VDG 0.3781 = KWG 1.00
With these quotes, is there an arbitrage profit opportunity, how do we know? If so, what is his profit in wrong?
Now, in response to Eric’s trades, the banks update their quotes. If you also trade in these same currencies, can you make an arbitrage profit with the new quotes listed below? If you also have ₩100,000,000 to trade what is your profit from the trade? What is your profit in dollars if the current ₩ /$ quote by Citibank is 840 ₩ /$?
Citibank quotes Cambodian riel per Korean Wong: CMR 1.7648 = KWG 1.00
National Bank of Vietnam quotes Cambodian riel per Vietnamese Dong: CMR 2.9819 = VDG 1.00
Nomura quotes Vietnamese Dong per Korean Wong: VDG 0.5992 = KWG 1.00
Solutions
Expert Solution
| Citi Bank Quotes | |||
| 1 KWG = 1.9324 CMR | |||
| Money Available | KWG | 10,00,00,000 | |
| CMR available | 19,32,40,000 | ||
| National Bank of Vietnam quotes | |||
| Cambodian riel per Vietnamese Dong: CMR 2.7506 = VDG 1.00 | |||
| With CMR available we can buy Vietnamese Dong (VDG) | |||
| 7,02,53,763 | |||
| and Nomura quotes | |||
| Vietnamese Dong per Korean Wong: VDG 0.3781 = KWG 1.00 | |||
| With VDG available he can buy Korean Wong (KWG) | |||
| 18,58,07,360 | |||
| Profit in arbitrage | 8,58,07,360 | ||
| Quote | KWG / USD | 840 | |
| Currency Available | KWG | 10,00,00,000 | |
| Citibank quotes | CMR /KWG | 1.7648 | |
| Total CMR available | 17,64,80,000 | ||
| National Bank of Vietnam quotes | |||
| CMR/VDG | 2.9819 | ||
| Total VDG available | 5,91,83,742 | ||
| Nomura quotes | VDG/KWG | 0.5992 | |
| Total KWG available | 9,87,71,265 | ||
| Loss | -12,28,735 | ||
| Loss in USD | -1,462.78 | ||
jeff jeffy answered 1 year agoRelated Solutions
On a recent trip to Africa, J.T. Brown, sales manager of Prompt Technology, took his wife...
On a recent trip to Africa, J.T. Brown, sales manager of Prompt
Technology, took his wife along at company expense. Linda White,
vice president of sales and Brown's boss, thought his travel and
entertainment expenses seemed excessive. But White approved the
reimbursement because she owed Brown a favor. White was aware that
the company president reviews all expenses recorded in the cash
payments journal, so White recorded Brown's wife's expenses in the
general journal as follows:
Respond to the following...
Beth, inspired by her study trip to Italy, wants to start a wood-fired brick open pizza...
Beth, inspired by her study trip to Italy, wants to start a
wood-fired brick open pizza business—on wheels. She’ll build the
oven on a trailer and carry it to craft fairs and other outdoor
events, as well as cater parties. She has estimated the relevant
costs and benefits and created the following time line showing the
project’s after-tax cashflows. 10 pts
0 1 2 3 4 5
(2,300) 800
1,600 2,600
3,500
4,000
Calculate the NPV and IRR...
Captain Sarfo is examining the trip manifest for round trip for his personnel carrier, and is...
Captain Sarfo is examining the trip manifest for round trip for
his personnel carrier, and is trying to plan how much food to
bring. His typical run goes from Ganymede station to Mars. As such,
he flies Martians almost exclusively, and plans his
trips by approximating food consumption using passenger height.
Since transporting excess weight increases fuel costs
significantly, Captain Sarfo relies heavily on the accuracy of this
prediction (going over or under is very undesirable).
Today, there is a conference...
6. Explain the comparative advantage of Vietnam in the recent context. - What are the goods...
6. Explain the comparative advantage of Vietnam in the recent
context.
- What are the goods that Vietnam has comparative
advantages?
- How to make best use of Vietnam’s comparative
advantage?
Write a report on trade, employment and wages in Vietnam in recent years. According to the...
Write a report on trade, employment and wages in Vietnam in
recent years. According to the macroeconomic theory and
analysis.
Not less than 2800 words.
Topic 1: Plato – the allegory of the cave Plato is inspired by his teacher Socrates,...
Topic 1: Plato – the allegory of the
cave
Plato is inspired by his teacher Socrates, but builds a grand
positive theory of true knowledge and the just society. Plato’s
“Allegory of the cave” (~380BC) introduces many of Plato’s central
ideas and also many of his personal and philosophical
rationales.
What is the implication of the allegory – and particularly the
potential killing of the returning prisoners - for the value of
democracy? Why is the ideal form of government...
On a recent trip to the united States, you purchased a ticket in a state lottery....
On a recent trip to the united States, you purchased a ticket
in a state lottery. Now you discover that you are the lucky winner
of the $30 million prize. You can take your prize money either as
(a) 30 payments of $1 million per year (starting today), or (b) $15
million paid today. If the interest rate is 8%, which option should
you take. Show calculations
2. James has just turned 35 years old, and he has decided it...
On a recent trip to the SC DMV, I asked an employee to estimate what percentage...
On a recent trip to the SC DMV, I asked an employee to
estimate what percentage of SC drivers arrive to renew their
driver’s license with one that is currently expired. She responded
that about 30 percent of all such renewals were of this
type.
(a) Suppose you observe Y , the number of SC DMV
customers seeking renewal to find the first one with an expired
license. What is the distribution of Y? Plot the pmf and cdf of...
On a recent trip to the SC DMV, I asked an employee to estimate what percentage...
On a recent trip to the SC DMV, I asked an employee to
estimate what percentage of SC drivers arrive to renew their
driver’s license with one that is currently expired. She responded
that about 30 percent of all such renewals were of this
type.
(a) Suppose you observe Y , the number of SC DMV
customers seeking renewal to find the first one with an expired
license. What is the distribution of Y? Plot the pmf and cdf of...
8. When the previous astronaut returns from his trip, the observer on Earth a. is the...
8. When the previous astronaut returns from his trip, the
observer on Earth a. is the same age as the astronaut because the
same perspective applies to both. b. is older than the astronaut
because of special relativity. c. is younger than the astronaut
because of general relativity. d. is younger than the astronaut
because of special relativity.
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- At the end of 2018, Terry Company prepared the following schedule of investments in available-for-sale debt...
- Welcome Inc. is a chain of fast-food restaurants located in major metropolitan areas in the South....
- A 16 g ball is fired horizontally with speed v0 toward a 111 g ball hanging...
- 1. Read the following case and answer the related questions: Nike is the largest seller of...
- do small companies that manufacture only a small handful of products need to be concerned with...
- Assume that the mean of the engineered part is 79.95 and standard deviation of 0.017291, with...
- Case Study -ZaraManufacturing doesn’t get much older than the textile and clothing industry. Since the earliest...
ADVERTISEMENT