Solution__Fin_mrk___3_banks - \$)\$ \$ 2\"7*8 7 7 3.64679)\$2#7 7 3.37268\"7#7*8 7 0.92911\"7\"=7#7\"7\"8\"7\"7(2 S(FF\/SFb u y = 3.64679 S(SF\/DMb u y = 0.92911

# Solution__Fin_mrk___3_banks - \$)\$ \$ 2"7*8 7 7 3.64679)\$2#7...

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❽➂❹\$➀➃❽( ➃❹➂❽➂ ➃➂❶+( (,➆❽ .❹➆(❼➂ ➃❽( ➛❶\$+❼❽(+\$ ❝.❽(❽+❹➆❽2  ❸➀\$2 #❹❿➂➀ ➆❽*➂ +➄-❸ ➁❽❹➅➂ ➃➂❺- 3.64679 #❹❿➂➀ ❞❷❻7 ❽#*❽❹❹8 +➄7#➈ :#❹➂: ➁❽❽:➈#* ➁❽+➄7#➈ 0.92911 :❹➄+➀❹ ❞❷❻7 ❽➄➂#❶ +#7➂ :#❹➂: ❽#*❽❹❹8 +➄7#➈ 3.37268 +#7➂ :#❹➂: ➁❽❽:➈#* ➁❽+➄7#➈ ❤❸➀*➄: ❷*❽❿ ➃❿ ➁7❹ ❞=❶7#❼❽-#7➀ :❹➄➂❷❺❸ ➃7❿ 8❽ ➁7❸ ❷❻7 ❽➄➂#❶ ❝ ❸(❹2. S(FF/SF buy ) = 3.64679; S(SF/DM buy ) = 0.92911; S(FF/DM sell ) = 3.37268 => => S(DM/FF buy ) = 1/3.37268 = 0.296500 Hence the buy chain is equal to 3.64679*0.92911*0.296500 = 1.00462 > 1, which indicates an arbitrage opportunity. To capture it, you sell SF1 for FF3.64679, you sell those for 3.64679*0.296500 = DM1.08127, and finally you sell those for 1.08127*0.92911 = SF1.00462. Your arbitrage profit is 1.00462 – 1 = SF 0.00462.  ❸➀\$2 ➀8 ❸#❽❿➂➀❹ ❸❽➄+➀ ➃❽➈❽➀❻❸ ❽#➆8 :➆❽-+ ➀➆ ❾➀8 ➃❼➄❼+❸ ❽➀7#8❽❸ +➄-- ❽7#❻7 ❸:7 ❸8❹➆ ❹➄❽7 ❾➀8 +➄-➀ ➅❻❽- ❷7➂ ➀❹❷❶❸ ❽➂❹7➀ +➄-8 ➆❷❹❽ ❸:7 ❽➀7#8❽❸ ❻❑8❸ :➂❹➆➀ ➁❽➄❹8❸ :❹➆-❼➂❸ ❝ ➁❹❽❸➀ -❑❸#7 #7➀❹❷ #❽❻➂ :7 ➆-+ 7❹❸8❹ ◗❸8❹➆ ➃❿ 7❹❸ :❹7❽*➂-❘ ❽➄❽➈❸ +#➂- +❧8 ❜❛ ❞❸❽➄+ ❻❑8 ❜