三角套汇原理(英文版)

0101653 施曼莉 Class 2 of Financial Management

The Principle of Triangular Arbitrage

1、The exchange rates are direct quotes (i.e. On the A,B,C market, the rates are b/a, c/b, a/c).

①If b/a×c/b×a/c <1, the dealers can sell local currency in the three market ,than buy foreign currencies .That means the direction is from right to left. For example, On the A market, they sell a for b , then selling b for c on B market, and selling c for a on C market.

②If b/a×c/b×a/c >1 , the dealers sell foreign currencies to buy local currency.

2、The three market exchange rates are indirect quotes. (i.e. On the A,B,C market, the rates are a/b, b/c, c/a).

①If a/b×b/c×c/a >1, the dealer's strategy is: On the A market, they sell a for b , then selling b for c on B market, then selling c for a on C market. The trading in accordance with the order of the indirect quotes, namely according to the direction of transactions multiplied;

② If a/b×b/c×c/a <1, the dealer's strategy is: according to the direction of transactions divided.

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