Does anyone have a quick or catchy method to figuring out a profit/loss on a triangular arbitrage opportunity? Every time I approach a question my brain explodes trying to figure out which side of the spread to use, which path to take, divide or multiply? and so forth… I know it’s a fairly simple thing that just takes some practice but I just can’t do it! Any re-takers see a question on this last year? Thanks fella’s
I get stuck on this too, as well as covered interest arbitrage payoffs. I know how to calculate the cross rate, which is the first part, and in covered int rate parity, i know how to figure out of the future is overpriced, but i blow up on calculating payoff on both.
Triangular arbitrage was not in last year’s exam if I recall correctly. I don’t think you need a shortcut here, work it out by going through the triangle in both directions.
Wasn’t on last year’s
Thanks rolo! And sorry for harassing you on the 80%+ performance, you’re going to kill it!
An easy approach to this in another post of mine… http://www.analystforum.com/phorums/read.php?12,1138394
I can’t see how this question will be on the exam, but just work on both ways. It’s not that bad. There might be easier way but I honestly don’t even wanna bother wasting my time to understand it.