CFA® Level II Economics - Cross Exchange Rate and Triangular Arbitrage

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This video will teach you all about cross exchange rates and triangular arbitrage. Cross exchange rates refer to the exchange rates between two currencies traded on different exchanges. Triangular arbitrage is a trading strategy that takes advantage of these cross exchange rate differences by converting one currency to another, and then converting it back to the original currency in order to profit from the difference. The video will explain the concept of cross exchange rates, how triangular arbitrage works and how it can be used to make a profit in the currency market.

[@johnholme783]

Thank you! Excellent video! Crystal clear! You explained it in detail, much better than my forex book!

[@nikitaprasad669]

You're the besttttt 🥰

[@edoardofabbro6941]

thank you, clearly explained. greetings from italy

[@PrepNuggets]

Glad it was helpful!

[@duyanhtran4723]

Thank you.

[@PrepNuggets]

Welcome!

[@khalidwithyoutub1000]

Thank you for sharing this video. In real life, Quantity is important while placing the order. How can we calculate the qty for all 3 pairs?

[@canoa6475]

Why in real market it doesn't work?

[@RonSKang1]

At 4:17 in the Triangular Arbitrage example, you switched from using 2 asks to a bid and said "This time it's up the bid," without explaining why. You switched again going in the opposite direction from 1 bid to 2 asks without explaining why. Why did you switch the first time and why the second time (please explain both separately to be clear because the switching appears completely arbitrary)? Thank you.

[@ramsesosirus]

It depends on if the currency you are buying is on the top (numerator) or bottom (denominator) of the exchange rate- top bid, bottom ask. So they usually change going the opposite direction. If I have Euros and am buying dollars, I look at the exchange rate- if the currency I am buying (dollar in this case) is on top, I use the bid. If the currency is on the bottom, I use the ask.

[@user-os3un9wc8y]

In Triangular Arbitrage - I guess you are using the Bid and Ask rate in a wrong manner. Kindly check through it. You are using Bid instead of Ask and vice versa.
Thank me later.