Follow the trading strategies in the lecture to profit from spatial arbitrage in foreign exchange markets. Assume zero transaction cost for the traders. (£–British pound. $–U.S. dollar. ¥–Japanese yen) 1) Bilateral arbitrage. London: 1£=2$. New York: 1£=2.1$. How to profit from $100? What are the profit and the rate of return? How to profit from L1000? What is the profit rate? 2) Triangular arbitrage. London: 1£=2$. New York: 1$=120¥. Tokyo: 1£=200¥. a. How to profit from 1£? What is the profit rate? b. How to profit from 1$? What is the profit rate? c. How to profit from 200¥? What is the profit rate?
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