Triangle arbitrage helps maintain equilibrium in the currency markets by exploiting price differences between different currency pairs. It ensures that currency exchange rates do not deviate significantly from their market equilibrium values for long periods.

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Triangle Arbitrage

Question 7

Multiple Choice

Triangle arbitrage:

A) no longer exists due to the advanced electronic communications used in today's markets.
B) only applies to forward exchange rates.
C) helps keep the currency market in equilibrium.
D) opportunities can only be found in the spot market.
E) only involves currencies other than the U.S.dollar.

Correct Answer: