# for my 24 year old friend- tri arb it up!

ok, I got D, but I’m not sure about it for the second one. I wasn’t sure what the .4 rate in the paragraph was, bid or ask.

Black . . . you are correct. From Schweser: Start with \$1,000. Use the \$1,000 to buy euros (1,000 × 1.000/) = 1,000. Use the 1,000 to buy sterling (1,000 / 0.4000/₤) = ₤2,500. Use the ₤2,500 to buy dollars (₤2,500 / ₤2.0100/\$) = \$1,243.78. Arbitrage profit = \$1,243.78 − \$1,000 = \$243.78.

\$1000 x 1E = 1000E x 1pound/.4E = 2500 pounds / 2.01 = \$1243.781 - the \$1k you started with… wham-o. when they put commissions in it gets really annoying but i doubt they’ll go that far. just work it around, always make sure you f&ck yourself by multiplying by the smaller # and dividing by the bigger one.

d

and i want to say it’s trial and error lxwqh- at tops it’d be 2 times around.

argg… i didn’t F*** myself when I changed dollars to pounds, D it is.

I lucked out again by getting the answer right the first go around. Setting up the triangle was the long part.

How do you know when to bid or ask again, from an intuitive perspective.

lose every time and you’ll be a winner ilvino! that’s the secret in tri-arb for me anyways. make it your mantra in bid/ask quotes to get screwed all the time!

(1,000/1)/.4/2.01 - 1,000 = 243.78 -> D

Just remember you have to mult by the smaller number and div by the bigger number and you should be all set to knock this down

well i sure have the losing part down…

when multiplying, use the bid… will get you a smaller # when dividing, use the ask… will get you a smaller #

A sumwhat easy way to remember what rate (bid or ask) to use, is to think of it as always paying the higher price, or always getting screwed by the dealers… for this problem \$1000 x 1 E (since your are multiplying and hense growing your money, you would multiply it at the lower rate…1 opposed to 1.0015) E 1000 /.4 as given finally L 2500 / 2.01 (since you are dividing, you would divide by the larger number 2.01 opposed to 2…this leaves you with a smaller amount of money…) Hope that makes sense to anybody…somebody…

ok…im a little late on that…

My answer was between A and D but closer to D. Rounding error?

Am I the only one who thinks the “up the bid down the ask” works. I feel like it requires zero thinking. I know I am not learning anything though. I understand the getting screwed always part, but it makes me think harder . . . no joke.

Good deal, I’m getting there, you guys are awesome for helping me out here.

niblita would you please explain the up the bid down the ask thing?

For this problem you have Euro/ 1.000 - 1.0015 If you are going from to Euro you are going “up the fraction” meaning going from denominator to numerator. When you go up you use the bid “Up the Bid” and its the opposite for the ask. -\> Euro use 1 "Up the bid" Euro -\> use 1.0015 “Down the Ask”