Triangular Arbitrage Step-by-Step

Step-by-step understanding of the triangular arbitrage concept in currency markets

[@monicafloresnelson5328]

It totally clicked for me when you said that I could "go 1 of 2 ways." 🤯 This was confusing in my book: I didn't think about going one way OR another (resulting in either a profit OR a loss); I only thought we could go one way and you either made a profit or not. This illustration showed me what I was missing. Thank you so much for this!

[@lyrics2540]

when i calculate, it is actually a loss if selling from bank A to B and C. So I guess it is either profit or loss

[@bodom11716]

this is by far the most difficult thing i have ever attempted to understand. Before this it was probabilities, but this is way worse. I just can't get it.

[@shagunkumar643]

I can see you are western

[@claytonjohnson6243]

I did the same steps except I realized the cross rate was wrong between dollars and pounds so I exchanged yen to pounds, pounds to dollars and then back to yen. The visualization is very helpful!

[@anasbully433]

terima kasih bapak/ibu, penyenggara hal ini di KZbin.

[@collegefinance]

Unfortunately, there is no cookbook approach. You could work both alternatives out, or analyze a problem keeping these issues in mind: (1) Identify the currency that you are trading in. This is generally given to you (2) Find the implied cross rate such that the trading currency is a part of the implied cross rate (3) Compare the implied cross rate to the given cross rate (4) Sell your currency to the bank that would give you a higher amount (5) Follow the path and complete the problem

[@rmetz2014]

Omg. You need to take over for my finance teacher. Her explanation was no where even near this! Didn't even use a triangle to explain it! (Hence triangular arbitrage) This makes so much more sense!

[@collegefinance]

The idea is to determine if there is a difference between the quoted cross-rate and the implied cross-rate. If so, we buy at the lower price and sell at the higher price and make arbitrage profit. If there is no difference between the quoted cross-rate and the implied cross-rate, we would be buying and selling at the same price so there would not be an arbitrage profit.

[@collegefinance]

Currencies are generally paired with the US dollar. When a currency is paired with another currency that is not a US dollar, we have a cross-rate. So when the yen is paired with the British pound, we have a cross-rate of 128 yen per British pound.

[@shubhamantri1492]

very clear explanation and demonstration. Thank-you

[@Kanmorph]

omg its so in time for me, god bless! so long in trading, but im impressed! Exactly for my new robot

[@muhammadariffkamarulbahrin3860]

it so easy when you use the triangle to explain

[@lifrancis1710]

Very useful! More useful than my current lecture notes! Thankyou!

[@TOMTOM123123330]

Very useful video. But I've still got confuse in some place in my exercise. Q: The following exchange rates are available to you Fuji Bank ¥120/$ Rushmore bank SF1.6/$ Matterhorn bank ¥80/SF Assume that you have SF10,000,000. Calculate two transactions using triangular arbitrage and demonstrate whether it is possible to make a profit. Thank you:)

[@collegefinance]

Sabrina Cheung , you just need to follow the same process. I'll outline the steps below to help you: 1) Convert 10,000,000 Swiss francs at receive 800,000,000 yen 2) Convert 800,000,000 yen at Mt. Fuji to receive $6,666,666.67 3) Convert $6,666,666.67 at Mt. Rushmore to receive 10,666,666.67 Swiss francs 4) The arbitrage profit = 10,666,666.67 - 10,000,000 = 666,666.67 Swiss francs

[@hoangvu5233]

damn , thank you

[@jucandy8]

thank you so much for this video! very simple to understand

[@mityskill6232]

Thank you! Such a great teacher!

[@Latin_American_Economic]

Thank you so much for the explanation. For someone reason this is hard to follow in my finance book. again, thank you for making easier to understand.

[@markrahim1842]

excellent tutorial,i understand this..Mr Padnani

[@michaelk4771]

Incredibly easy to understand thank you so much!

[@collegefinance]

You want to make sure that the implied cross rate contains the currency in which you want to trade, in this example it's the yen.

[@mufaslow]

What if you want to trade In US dollars, and yet you've said it's absence is what makes a cross rate?

[@elifbayramogluu]

very helpfull thank you so much!

[@abrowski999]

Thanks, really helpful

[@MrUzzyb]

Thanks very much for sharing your expertise

[@LagartaGCB]

Could you include an example that includes the bid-ask/offer spreads included in this calculation. Also, many arbitrageurs lever themselves, as the risk is mitigated. I would want to see an example where the arbitrageur starts with 0 units of currency. The first step would be borrowing at spot rate in base currency, conversion to price currency, sell forward against base currency, lend price currency for 90 days at price domiciled interest rate, then convert back to base currency, and pay back interest on initial borrowing with proceeds of lending in price domiciled country. You might have a nice little arbitrage profit. And start with 0 currency units.

[@collegefinance]

I'll add your suggestion to the list of videos I am working on.

[@orchidsinurgarden5097]

Thank you so much

[@eldredajome]

Appreciate the detailed breakdown! I need some advice: My OKX wallet holds some USDT, and I have the seed phrase. (air carpet target dish off jeans toilet sweet piano spoil fruit essay). How should I go about transferring them to Binance?

[@seanstickney]

Thank you It Did Help. All The Best.

[@LeixandreHinojosa]

Thank you so much for your hard work! 😊 I’ve got a question: 🤨 I found these words 😅. (behave today finger ski upon boy assault summer exhaust beauty stereo over). What should I do with this? 🤷‍♂️

[@victorrrrrrrrrrable]

this is genius.

[@Laura11001]

Thanks, that's what I needed!

[@scottliu5057]

Great video! Although, I think by around 2 minutes the slides were out of sync with the audio. But I still understood a lot. Thanks!

[@scottliu5057]

Sorry I mean around 3 minutes.

[@sambaraka]

@@scottliu5057 àp

[@booties420]

I’m going to use this method, may you please give me a formula to figure it out for 3 different currencies? In writing I’m going to rewatch this and also try and figure it out

[@aeonaece]

I'm here not as a finance student 😂, question though, how do I calculate the quantity I need to buy the first currency assuming I don't have a hundred million yen. There should be a formula to see the least quantity that could result in a profitable Abitrage.

[@tekk2k8]

How do you physically put the orders in? My thinking is that the prices would change by the time you finish putting all of the orders in.

[@TahliaCollica]

can you show the calculation from bank A to B to C as well please?

[@rukiaamin5344]

great👍👏

[@Showsable]

Very helpful...Thanks

[@arnabsarkar4477]

How to find out the limits of a rate to ensure no scope of arbitrage?

[@nickboydpoole]

Great video thanks mate

[@jennaayyafc]

Thank you so much!

[@SpeedBallRockz]

thank you SO much

[@therealme9345]

Could i do this in stock market? How?

[@alfredloo4671]

Thank You SO Much!!!

[@mohmt]

tooo much useful !!!!!

[@MTRL25]

What if there is also bid and ask rate. Which rate should we use to find cross rate?

[@booties420]

What are good triangular triples right now but can you please tell me the order to do so? So I can profit please :( I’m having a very hard time understanding this

[@jessicaprettyleaf3410]

When starting with Bank C why do you divide 100,000,000 yen by 128 and then multiply the other 2 (bank B and A)?

[@collegefinance]

It all depends on what currency you're converting from and what currency you're converting to. This video should help clarify the issue: kzbin.info/www/bejne/eH3KaYyjoqyYZsU

[@collegefinance]

If you convert at bank C, you need 128 yen to get a pound so we divide 100,000,000 yen to determine the number of pounds. When you convert pounds to dollars, you get $1.60 for each pound you sell so we multiply. For more details on this you can check out the following video: kzbin.info/www/bejne/eH3KaYyjoqyYZsU

[@yenham160891]

i have no idea which bank i should start with...do i always need to start in both alternatives. and then see which one gives better value.? or is that any other quicker way help me to identify which bank to start the trade without having calculation for both alternatives? many thanks

[@dulcinea0691]

Thank you so much. :D

[@huaiwang4394]

Hi, how to identify the sequence of triangular arbitrage?

[@collegefinance]

There is no standard sequence. You have to follow the currency you are starting with.

[@user-zq1lb3lx4m]

Here for Professor Ironside!!

[@ashazus6012]

Sir..will it make any difference if yen over dollar is used instead of yen over pound to compare the rate?

[@jackmoshi]

how to identify the cross rate ?

[@collegefinance]

+Jack Moshi, most currency pairs have the US dollar in them such as ¥120/$ or $1.50/£. Sometimes, you find currency pairs that do not have the US dollar in them and they are cross-rates. An example would be €1.25/£.

[@jackmoshi]

+collegefinance thank you 😊

[@racheltee7688]

Jack Moshi

[@PepeTostado]

HELLO THERE, ARE THERE ANY ONLINE PLATFORMS THAT LET YOU EXCHANGE MONEY FROM CURRENCY TO CURRENCY OR DO I HAVE TO DO THIS WITH BANKS, SHOULD I OPEN A BANK ACCOUNT FOR EACH CURRENCY, THANKS!

[@vrgslpz]

You rock!

[@x520x1314x]

1:08 quoted cross rate?? Why do we start with C and not A . A also has yen but i dont understamd why we cant use that just cuz it has USD..

[@sonianoviango]

how to you know which banks to use for the cross rate

[@siddharth00775]

my profs explanation sucked ass. ty for this

[@juanitoqueintin5908]

Couldn’t of pick a worse audio for this

[@antovnagyawali264]

What should we do if 1000000 is given in $ ?

[@collegefinance]

In that case you would find the implied yen/dollar rate by dividing 128 yen/pound by $1.60/pound and coming up with 80 yen/dollar. Now start with Bank A, then Bank C, and finally convert pounds into dollars at Bank B.

[@ديمالعمري-ب7س]

ش!!!!!!!!!!

[@dalirafrafand]

meme man

[@translatingsao]

you lost me at 2 minutes

[@lewispro2811]

I heard that this is illegal.is it?

[@cancergirl92]

Thank you so much! It's easier to do this even with bid-ask quotes!

[@JEAND-kl6fo]

thank you so much!

[@loveisbeautiful9298]

very very useful.. thank u..