How do you calculate arbitrage profit?

Updated: 1/19/2023
User Avatar

Wiki User

13y ago

Best Answer

a 2-year bond pays annual coupon of 5.5%, has annual effective yield of 9.3%,and has a par value of RM100. the 1-year spot rate is 7% and the 2-year spot rate is 9%.

describe the strategy that requires the sale or purchase of exactly one of the 5.5% 2-year bonds and produces arbitrage profit of RM0.59

User Avatar

Wiki User

13y ago
This answer is:
User Avatar
User Avatar

Joerich Ihechi

Lvl 1
1y ago
To calculate arbitrage profit, you need to take into account the prices at which you can buy and sell the same security in different markets. My recommendation for you: 𝓱𝓽𝓽𝓹𝓼://𝓪𝓻𝓫𝓲𝓽𝓻𝓪𝓭𝓮𝓼.𝓬𝓸𝓶/𝓼𝓲𝓰𝓷𝓾𝓹/𝓘𝓞𝓤𝓑𝓟35𝓩𝓘80.𝓱𝓽𝓶𝓵
More answers
User Avatar

Joerich Ihechi

Lvl 4
1y ago

o calculate arbitrage profit, you need to take into account the prices at which you can buy and sell the same security or commodity in different markets. Subtract the lower price from the higher price, and that will be your arbitrage profit. My recommendation for you: 𝓱𝓽𝓽𝓹𝓼://𝓪𝓻𝓫𝓲𝓽𝓻𝓪𝓭𝓮𝓼.𝓬𝓸𝓶/𝓼𝓲𝓰𝓷𝓾𝓹/𝓘𝓞𝓤𝓑𝓟35𝓩𝓘80.𝓱𝓽𝓶𝓵

This answer is:
User Avatar

Add your answer:

Earn +20 pts
Q: How do you calculate arbitrage profit?
Write your answer...
Still have questions?
magnify glass
Continue Learning about Other Math

How do you calculate profit?

you take the earning before interest and taxes

What is the formula for calculating loss?

You calculate loss the same as you would do profit income minus expenses (outgoings) = profit/loss If the answer is negative then you are making a loss, if the answer is positive then you are making a profit.

What is a condition that will give rise to a triangular arbitrage opportunity?

Triangular arbitrageis the process of trading out of the U.S. dollar into a second currency, then trading it for a third currency, which is in turn traded for U.S. dollars. The purpose is to earn an arbitrage profit via trading from the second to the third currency when the direct exchange between the two is not in alignment with the cross exchange rate.Most, but not all, currency transactions go through the dollar. Certain banks specialize in making a direct market between non-dollar currencies, pricing at a narrower bid-ask spread than the cross-rate spread. Nevertheless, the implied cross-rate bid-ask quotations impose a discipline on the non-dollar market makers. If their direct quotes are not consistent with the cross exchange rates, a triangular arbitrage profit is possible.

What is a arbitrage?

Arbitrage is the simultaneous buying and selling of an asset in different markets or in different forms in order to take advantage of differing prices for the same asset. It is a trade that profits by exploiting the price differences of identical or similar financial instruments on different markets or in different forms. I recommend one of the best and rewarding arbitrage platform to you: 𝓱𝓽𝓽𝓹𝓼://𝓪𝓻𝓫𝓲𝓽𝓻𝓪𝓭𝓮𝓼.𝓬𝓸𝓶/𝓼𝓲𝓰𝓷𝓾𝓹/𝓘𝓞𝓤𝓑𝓟35𝓩𝓘80.𝓱𝓽𝓶𝓵

How are quadratic equations used in the real world?

There are many ways quadratic equations are used in the real world. These equations are used to calculate area, speed and profit

Related questions

What is search arbitrage?

Search Arbitrage is the profit realized from the price discrepancies in the value of search results to a query.

How does arbitrage betting work?

Arbitrage betting is when the gambler will put a bet on different outcomes of the same event. This means the better can make a profit regardless of how the event turns out.

What does the term arbitrage profit means?

Arbitrage profit is profit derived from a riskless (or near riskless) transaction. For example, say gold is selling on the London exchange for $800 per oz and gold is selling on the New York exchange for $804 per oz. Buying one oz of London gold and selling one oz of New York gold (trades in close proximity) provides an arbitrage profit of $4 (less transaction fees). The purchase and sale will likely have the effect of increasing the price of London gold and decreasing the price of New York gold. So for every subsequent trade, the arbitrage profit will be lower and lower until the prices are at parity.

What does the day trading term arbitrage trading mean?

Arbitrage trading is trading that takes advantage of a difference in price between two or more different markets, to make a profit equal to the difference in the market prices. Arbitrage trading is useful in banks and brokerage firms.

What are some equity Arbitrage funds in India?

These are Mutual Funds that invest in Arbitrage Opportunities.Note: Arbitrage Opportunities are a special class of investment where the fund manager tries to make a profit out of the pricing mismatch between the Equity and Derivatives Market. It is a separate topic in itselfExample:a. ICICI Prudential Equity and Derivatives Fund - Income Optimiser Planb. HDFC Arbitrage Fund - Retailc. Kotak Equity Arbitrage Fundd. etc

Should you calculate the profit on cost or Sales?

We should calculate the profit on sales

What is a currency expert called?

Hank Paulson A person who trades one currency with another, and/or between markets, hopefully, for profit, is said to be doing 'arbitrage', and is called an arbitrageur. Please see 'arbitrage' on for further detail. A coin collector is known as a numismatist.

Which of these describes the process of exchanging currency between three banks in order to gain a profit from the exchange rate of each type of currency?

triangular arbitrage

When was Arbitrage released?

Arbitrage was released on 09/14/2012.

What was the Production Budget for Arbitrage?

The Production Budget for Arbitrage was $12,000,000.

What is an arbitrage pricing theory?

An arbitrage pricing theory is a theory of asset pricing serving as a framework for the arbitrage pricing model.

How do you calculate profit margin ratio?

net profit/sales