When the a transaction involves the purchase and sale of three different currencies so that the person conducting the transaction begins with a specific amount of one currency and ends with a greater amount of that currency,the transaction is:
A)a three-party currency exchange.
B)a currency market currency swap.
C)illegal unless approved by the countries issuing the currency involved.
D)an example of triangular arbitrage.

Question

Quizplus · Accepted Answer

The given scenario is an example of triangular arbitrage, where a trader exploits a pricing discrepancy between three different currencies to generate profit. The trader starts with one currency, buys and sells the other two currencies, and then converts back to the initial currency with a higher amount, making a profit in the process. This type of transaction is legal and commonly used in the foreign exchange market.

When the a Transaction Involves the Purchase and Sale of Three