Due to ____, market forces should realign the spot rate of a currency among banks.
A) forward realignment arbitrage
B) triangular arbitrage
C) covered interest arbitrage
D) locational arbitrage

Question

Due to ____, market forces should realign the spot rate of a currency among banks.​
A) ​forward realignment arbitrage
B) ​triangular arbitrage
C) ​covered interest arbitrage
D) ​locational arbitrage

Quizplus · Accepted Answer

Locational arbitrage refers to the process of exploiting differences in exchange rates between different locations within the same market to make a profit. By engaging in locational arbitrage, market forces should realign the spot rate of a currency among banks. Choice A, B, and C refer to other types of arbitrage that do not necessarily involve market forces realigning spot rates.

Due to ____, Market Forces Should Realign the Spot Rate