If the quoted cross rate between two foreign currencies is not aligned with the two corresponding exchange rates, investors can profit from triangular arbitrage.

Question

Quizplus · Accepted Answer

Triangular arbitrage involves exploiting inconsistencies in the cross exchange rates between three currencies, which can lead to profitable trades. Therefore, if the quoted cross rate between two foreign currencies is not consistent with the two corresponding exchange rates, investors can potentially profit from triangular arbitrage.

If the Quoted Cross Rate Between Two Foreign Currencies Is