Business, 18.06.2020 06:57 1xXJOKERXx3

Arbitrage and spot exchange rates Suppose you trade dollars and euros for a bank that has branches in Los Angeles and Frankfurt. You can electronically transfer the funds between the two branch locations at no cost, and trading commissions are negligible. The current dollar-per-euro exchange rate in Los Angeles is E$/EURLA=1.5952E$/EURLA=1.5952 , while in Frankfurt, it is E$/EURFR=1.6244E$/EURFR=1.6244. You can make a profit for the bank if you buy euros inand sell them in. Assuming other foreign exchange traders face the same exchange rates you do, they will buy dollars in and sell them in. As a result, the dollar-per-euro exchange rate in Frankfurt (E$/EURFRE$/EURFR) will, and the dollar-per-euro exchange rate in Los Angeles (E$/EURLAE$/EURLA) will.

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Arbitrage and spot exchange rates Suppose you trade dollars and euros for a bank that has branches...

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