Arbitrage profit on exchange rates
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Suppose £1 = $2.50 in New York, $1 = ¥125.00 in Tokyo, and £1 = ¥250.00 in London. If you begin by holding ¥100, how could you profit from these exchange rates? Ignoring transaction costs, what is your arbitrage profit per 100 yen.
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Solution Summary
The solution explains how to calculate the arbitrage profit on exchange rates.
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There is a mismatch in cross rates and so we can make a profit.
We start with Yen 100.
Convert Yen ...
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