Arbitrage Flashcards
1
Q
Define arbitrage.
A
Profiting from price differences in the foreign exchange market.
2
Q
Types of Arbitrage
A
Spatial arbitrage, triangular arbitrage, covered interest arbitrage.
3
Q
Factors determining exchange rate level
A
-interest rates (higher rate = higher return)
-economic indicators (GDP growth, employment %, strong economy=strong currency
-political stability (stability=attractivity)
-trade balance (exports>imports=currency demand)
-speculation (investors think price may rise & invest, driving value)
