Triangle arbitrage:
I. is a proﬁtable situation involving three separate currency exchange transactions.
II.helps keep the currency market in equilibrium.
III.opportunities can exist in either the spot or the forward market.
IV.only involves currencies other than the U.S.dollar.

Question

Triangle arbitrage: 
I. is a proﬁtable situation involving three separate currency exchange transactions.
II.helps keep the currency market in equilibrium.
III.opportunities can exist in either the spot or the forward market.
IV.only involves currencies other than the U.S.dollar.

Quizplus · Accepted Answer

I, II, and III are correct. Triangle arbitrage involves exploiting differences in currency exchange rates across three currencies to make a profit, which helps keep the market in equilibrium. These opportunities can exist in both the spot and forward markets. Statement IV is incorrect because triangle arbitrage is not limited to currencies other than the U.S. dollar; it can involve any set of three currencies.

Triangle Arbitrage: I. Is a Proﬁtable Situation Involving Three Separate Currency Exchange