A tale of 3 currencies

[Queen Seok Duk]

For those of you who are familiar with currencies.

Lets say we have 3 different currencies - A, B, C.

Lets say when you exchange A for C, you get X.

Is it possible that instead exchange A for C, you exchange A for B, and then B for C, and you get a value that is more than X ?

 

[Maximilian Chua-Heng]

With double the slippage, I doubt so.

For those of you who are familiar with currencies.

Lets say we have 3 different currencies - A, B, C.

Lets say when you exchange A for C, you get X.

Is it possible that instead exchange A for C, you exchange A for B, and then B for C, and you get a value that is more than X ?

 

[Xisiqomelir]

For those of you who are familiar with currencies.

Lets say we have 3 different currencies - A, B, C.

Lets say when you exchange A for C, you get X.

Is it possible that instead exchange A for C, you exchange A for B, and then B for C, and you get a value that is more than X ?

That's triangle arbitrage.

To answer your question: yes it is possible, but it shouldn't happen in efficient markets.

 

[Cestbon]

No if you change at the same timing. Because any money changer/bank will charge small % normally about 0.5~5% for every exchange depend on currency but for major currency they will charge less than 0.5%( US$, E$, Yen, RMB., RM in Singapore)
Since you change twice and you will be charge twice.
The only why to gain is buy and keep for a time just like playing stock/share market. Buy low sell high.

 

[halsey02]

That's triangle arbitrage.

To answer your question: yes it is possible, but it shouldn't happen in efficient markets.

Arbitrage is not for the common man to deal in, unless that person knows the mechanism of the market well, FX etc..

The bank will only do this for high worth clients...that is dealing in million of dollars...

 

[lifeafter41]

That's triangle arbitrage.

To answer your question: yes it is possible, but it shouldn't happen in efficient markets.

The market is never efficient, every transaction occurs, someone or some entity will make some money out of it. The more times it transact, the more you lost.

 

[Leckmichamarsch]

The market is never efficient, every transaction occurs, someone or some entity will make some money out of it. The more times it transact, the more you lost.

Sounds like Baccarat to me........ the more you turn over, the greater your disadvantage. Henry Kwek found out too late!!
He thot he found a way to treasure trove...

 

[denzuko1]

You will get less because of the double exchange. the agency that you exchange with will charge a commission on every exchange. Unfortunately if you need to exchange 2 different currencies other than SGD in Singapore, you have to go through the double exchange process, eventually, you will get y which is less than x.

 

[wikiphile]

or so according to wikipedia's explanation, doesn't seem to be that attractive. Biggest earners at the end of the day will be the clearing houses and brokers

http://en.wikipedia.org/wiki/Triangular_arbitrage

 

[saratogas]

Watever the case u wouldnt get a win-win exchange rate frm our Ah neh money changer...

 

[bryanlim1972]

For those of you who are familiar with currencies.

Lets say we have 3 different currencies - A, B, C.

Lets say when you exchange A for C, you get X.

Is it possible that instead exchange A for C, you exchange A for B, and then B for C, and you get a value that is more than X ?

yes, with the right arbitrage opportunities. you can even make money by changing A for C and C back to A. and on and on and on...

unfortunately d traders in d banks have already beat you to this ABC idea.

 

[Queen Seok Duk]

In my example,

A = Baht
B = USD
C= TWD

I have checked the respective rates for Selling USD via TT.

For 1 million baht, it's USD 1 = Baht 31.20

Convert to USD = 32,051

For buying of USD by Taiwan Bank [at Taiwan]

USD 1 = TWD 31.93

Convert USD 32,051 to TWD = TWD 1,023,388


So 1 million Baht via USD = TWD 1,023,388

But :

The same bank in Taiwan buy THB at:

Baht 1 = TWD 1.009

Baht 1,000,000 = TWD 1,009,000, if you change THB to TWD direct, i.e A to C.

So the difference is 1,023,388 - 1,009,000 = 14,388 in TWD