Ryan, a foreign-exchange dealer, sold U.S.dollars for Swiss francs in the United States, then sold Swiss francs for Japanese yen in Switzerland, and then sold the Japanese yen for U.S.dollars in the United States.Ryan hopes that he will end up with more U.S.dollars than when he began.Which term best describes Ryan's actions?

Question

Quizplus · Accepted Answer

Ryan's actions describe an arbitrage trade, which involves taking advantage of price discrepancies in different markets to make a profit. In this situation, Ryan is buying low and selling high in different currency markets to end up with more U.S. dollars than he started with. Speculation refers to making a bet on future price movements without necessarily taking advantage of price disparities. Spot transaction and outright forward refer to different types of currency trades and are not relevant to Ryan's strategy.

Ryan, a Foreign-Exchange Dealer, Sold U