Locational arbitrage is possible when: The bid price for a given currency in two
ID: 2615517 • Letter: L
Question
Locational arbitrage is possible when:
The bid price for a given currency in two locations is different.
The ask price for a given currency in two locations is different.
The bid price for a given curreny in one location is greater than the ask price in another location.
The ask price for a given currency in one location is greater than the bid price in another location.
The bid price for a given currency in two locations is different.
The ask price for a given currency in two locations is different.
The bid price for a given curreny in one location is greater than the ask price in another location.
The ask price for a given currency in one location is greater than the bid price in another location.
QUESTION 15 0 400 0-58655 O 000 QUESTION 16Explanation / Answer
Locational arbitrage is a strategy in which a trader tries to get profit from differences in the exchange rate offered by different banks on the same currency. It is possible only when the bid price for a given currency in one loaction is greater than the ask price in another loaction.
Hence, the correct option is (c)
The concept of Locational arbitrage can be very well understood with the help of the following example:
Here, one can buy New Zealand dollars from XYZ Bnak for $0.395 and sell them to ABC Bank for $0.398 and earn profit
ABC Bank XYZ Bank Bid price of New Zealand dollar $0.398 $0.393 Ask price of New Zealand dollar $0.400 $0.395Related Questions
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