Solution__Fin_mrk___3_banks - +()(, $() .()()$+(+$).(+2...

This preview shows page 1 - 2 out of 2 pages.

The preview shows page 1 - 2 out of 2 pages.
❽➂❹$➀➃❽( ➃❹➂❽➂➃➂❶+( (,➆❽.❹➆(❼➂ ➃❽( ➛❶$+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#➈0.92911:❹➄+➀❹ ❞❷❻7 ❽➄➂#❶ +#7➂ :#❹➂: ❽#*❽❹❹8 +➄7#➈3.37268+#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/SFbuy) = 3.64679; S(SF/DMbuy) = 0.92911; S(FF/DMsell) = 3.37268 =>=> S(DM/FFbuy) = 1/3.37268 = 0.296500Hence the buy chain is equal to 3.64679*0.92911*0.296500 = 1.00462 > 1, whichindicates an arbitrage opportunity. To capture it, you sell SF1 for FF3.64679, you sellthose 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$2➀8 ❸#❽❿➂➀❹ ❸❽➄+➀ ➃❽➈❽➀❻❸ ❽#➆8 :➆❽-+ ➀➆ ❾➀8 ➃❼➄❼+❸ ❽➀7#8❽❸ +➄-- ❽7#❻7 ❸:7❸8❹➆ 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❜

Upload your study docs or become a

Course Hero member to access this document

End of preview. Want to read all 2 pages?

Upload your study docs or become a

Course Hero member to access this document

Term
Spring
Professor
bergman
Tags
Finance, Arbitrage, Finnish, Trigraph, Equals sign, Bank Leumi, Finnish Marka

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture