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QUESTION
A bank is quoting the following exchange rates against the dollar for Swiss franc and the Australian dollar: SF/$:5960-70 A$/$:7225-35 A client of...
- A bank is quoting the following exchange rates against the dollar for Swiss franc and the Australian dollar:
SF/$: 1.5960-70
A$/$: 1.7225-35
A client of the bank asks the bank for an A$/SF quote. What cross-rate would the bank quote?
- A trader specializes in cross-rate arbitrage. She notices the following quotes:
Swiss franc/dollar = SF1.5971/$
Australian dollar/ US dollar = A$1.8215/$
Australian dollar/Swiss franc = A$1.1440/SF
Does an arbitrage exist? If so, what are the steps she should take if she had $1,000,000?
- The market bid/ask quote for $/£ is $1.4397 - 1.4402. A market maker has a strong opinion about the future direction of the pound and places his quote as "98-03". Which currency does the market maker expect to appreciate?
