Explore BrainMass

Explore BrainMass

    Locational/ Spatial Arbitrage

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    7. Suppose the euro is quoted at 0.7064-80 in London and the pound sterling is quoted at 1.6244-59 in Frankfurt.
    a. Is there a profitable arbitrage situation? Describe it.
    b. Compute the percentage bid-ask spreads on the pound and euro.

    © BrainMass Inc. brainmass.com June 3, 2020, 7:11 pm ad1c9bdddf
    https://brainmass.com/business/arbitrage-pricing-theory/89200

    Solution Preview

    7. Suppose the euro is quoted at 0.7064-80 in London
    and the pound sterling is quoted at 1.6244-59 in
    Frankfurt.
    a. Is there a profitable arbitrage situation? Describe it.
    b. Compute the percentage bid-ask spreads on the pound and euro.

    a. Is there a ...

    Solution Summary

    The solutional identifies Locational/ Spatial Arbitrage opportunity and calculates percentage bid-ask spread on pound and euro

    $2.19

    ADVERTISEMENT