thought i had this down…
i am doing challenge problem 12 of ECON p.315 schweser:
EUR/USD: 0.7-0.701
USD/GBP: 1.7-1.701
EUR/GBP: 1.2-1.201
what is the profit on triangle arbitrage on 1 million USD? when i go one way around the triangle, i get the right answer (6372$), but when i go the other way, i get minus 9159$. is that right? should i go both ways and take the positive number as the answer?
no one said that if you do the traingle the other way around it’s gonna be the same number.
in fact, both of your calculation are good.
right, so what is the difference between the 2 numbers i am getting?
the difference has no meaning. only one way can make money in triangular arb. at the end you should have more than you started with.
right, that’s what i thought. have to close the books - i know this stuff, just second guessing! thanks
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yeah, that was a brain fart. gotta stop eating those beans. can’t afford it tomorrow!