Triangular Arbitrage

Dealer’s bid CAD/BRL = C$0.5250

Interbank CAD/USD = 1.2138/1.2259 BRL/USD = 2.3844/2.4082

Triangular Arbitrage profit on USD1million =?

A. US$31,328. B. US$21,135. C. US$31,315. CAD/BRL = USD/BRL x CAD/USD = 1/2.4082 x 1.2138 = CAD/BRL 0.5040 (0.5250-0.5040)=CAD/BRL 0.021 / 1.2259 = .1713 x 1,000,000 = US$17,130 ? What am I doing wrong?

You know that ask>bid in any quote (Ask for more). So if BRL/USD=2.3844/ 2.4082 then USD/BRL= 0.4152 /0.4194

Can you see what I did there?

Yes, that’s what I did.

What is the correct answer? Is it $10, 866?

Start with 1,000,000 USD

Buy BRL on the market / Sell USD : 1,000,000 USD x 2.3844 = 2,834,400 BRL

Sell BRL to dealer / Buy CAS : 2,834,400 BRL x 0.5250 = 1,251,810 CAD

Sell CAD on the market / Buy USD : 1,251,810 CAD / 1.2259 = 1,021,135.49 USD

Arbitrage profit: 21,135.49 USD

Even if you do it your way it won’t get the right answer.

I know this is from their answer, but can you calculate it with the other method?

These questions are hell.

I am hoping one item set comes from ECO

I really dont want to learn ECO in detail.

It seems like the worst topic so far.


I have made a youtube video explaining triangular arbitrage in a very straightforward and simple way. Check it out here, and let me know what you guys think and if you found it useful.

I cant post links but search for this vid: CFA Level 2 - Economics | Arbitrage Triangle Explained

Kind Regards

Here is Coenrad’s video: