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Arbitrage Calculator 3

This document summarizes two potential arbitrage opportunities involving currency exchange rates between EUR, GBP, and USD. The first involves buying GBP and EUR through different brokers then selling to realize a $116 profit. The second evaluates forward and futures contracts for GBP/USD, identifying an opportunity to realize an $11.59 profit by shorting a futures contract and engaging in currency borrowing and lending.

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Eduardo Montanha
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437 views4 pages

Arbitrage Calculator 3

This document summarizes two potential arbitrage opportunities involving currency exchange rates between EUR, GBP, and USD. The first involves buying GBP and EUR through different brokers then selling to realize a $116 profit. The second evaluates forward and futures contracts for GBP/USD, identifying an opportunity to realize an $11.59 profit by shorting a futures contract and engaging in currency borrowing and lending.

Uploaded by

Eduardo Montanha
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as XLSX, PDF, TXT or read online on Scribd
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Arbitrage Calculator

Cross currency arbitrage


Trade size 10000
First currency EUR
Second currency GBP
Third currency USD

Broker A Pair Buy rate Sell rate


Rate one EUR/USD 1.2215 1.2210
Rate two GBP/USD 1.5505 1.5500
Implied cross rate EUR/GBP 0.7878 0.8122

Broker B
Cross rate EUR/GBP 0.7800 0.7795
GBP/EUR 1.2821 1.2829

Arbitrage opportunity
Buy 7800 x GBP from A @ 1.2094 USD
Buy 10000 x EUR from B @ 0.7800 GBP
Sell 10000 x EUR to A @ 1.2210 USD
Profit 116.10 USD
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Forward and futures Arbitrage


First currency GBP GBP/USD
Second currency USD
GBP/USD Futures quote 1.4400 Include all trade fees in quotes

GBP/USD Spot quote 1.4500


Contracts to trade 1
Contract size 1,000
Delivery 12 months
GBP 12-months interest rate 3.00%
USD 12-months interest rate 1.50% Enter the interest rate that matches the
Interest rate spread 0.00% length of the futures contract

Fair value 1.4284


Anomaly 0.0116 Add any costs for borrowing or lending

Arbitrage opportunity
Sell 1 x GBP/USD Future @ 1.4400
Borrow USD 1407.15 @ 1.50%
Convert USD 1407.15 to 970.45 GBP
Deposit GBP 970.45 @ 3.00%

After 12 months
Value of GBP 970.45 is now 1,000.00 GBP
Deliver amount 1,000.00 GBP
Receive amount 1440 USD
Repay loan interest @ 1.5% 21.27 USD
Profit 11.59 USD
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that matches the


ontract

r borrowing or lending
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