If Differences Occur for FX Rates Between Three or More

question 48

Multiple Choice

If differences occur for FX rates between three or more currencies,FX dealers may perform:

• A) locational arbitrage.
• B) triangular arbitrage.
• C) cross arbitrage.
• D) speculative arbitrage.

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Definitions:

Price-Maker

An entity, such as a firm, that has the ability to influence the price of goods or services it sells, typically due to lack of competition.

Perfect Competitor

A theoretical market structure where many firms sell identical products, with no single seller able to influence market prices, ensuring maximum efficiency.

Withholds Output

A strategy where a firm or supplier limits the supply of a product to increase demand or prices.

Perfect Competition

A market structure characterized by a large number of buyers and sellers, homogenous products, and the free entry and exit of firms, leading to price-taking behavior.