Bank A quotes you that $1 will buy 2 Argentinean pesos or 5 Danish krone. At the same time, bank B provides you a quote of 3 pesos to buy 5 krone. Thus, there exists a potential for immediate proﬁt
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Question

Quizplus · Accepted Answer

The scenario described is an example of triangle arbitrage, where the exchange rates of three currencies create an arbitrage opportunity. By using the exchange rates offered by bank A and bank B, it is possible to buy pesos at a lower rate from bank A and immediately sell them to bank B at a higher rate for krone, and then use the krone to buy more pesos at a lower rate from bank A. This creates a triangular loop that can result in immediate profit.

Bank a Quotes You That $1 Will Buy 2 Argentinean