What Is Triangle Arbitrage

question 61

Essay

What is triangle arbitrage?
Using the U.S. dollar,the Canadian dollar,and the euro,construct an example in which triangle arbitrage exists,and then show how to exploit it.

---

Definitions:

Price Floor

A government-imposed minimum price charged for a good or service, typically above the equilibrium price, to prevent prices from falling too low.

Equilibrium Price

The price at which the quantity of a good demanded by consumers equals the quantity supplied by producers, leading to a stable market condition.

Surplus

The situation in which the quantity of a good or service supplied exceeds the quantity demanded at the current price; often occurs in markets where a price ceiling prevents the price from rising to its equilibrium level.

Market Price

The current price at which an asset or service can be bought or sold, determined by supply and demand.