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Adding short description: "Forex arbitrage across three currencies" (Shortdesc helper) |
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==Cross exchange rate discrepancies==
Triangular arbitrage opportunities may only exist when a [[bank]]'s quoted exchange rate is not equal to the market's implicit cross exchange rate. The following equation represents the calculation of an implicit cross exchange rate, the exchange rate one would expect in the market as implied from the ratio of two currencies other than the base currency.<ref name="Feenstra & Taylor 2008">{{Cite book | title = International Macroeconomics | author = Feenstra, Robert C. | author2 = Taylor, Alan M. | year = 2008 | publisher = Worth Publishers | ___location = New York, NY | isbn = 978-1-4292-0691-4 | url-access = registration | url = https://archive.org/details/internationaleco0000feen }}</ref><ref name="Levi 2005">{{Cite book | title = International Finance, 4th Edition | author = Levi, Maurice D. | year = 2005 | publisher = Routledge | ___location = New York, NY | isbn = 978-0-415-30900-4}}</ref>
:<math>S_{a/\$} = S_{a/b} S_{b/\$}</math>
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