Crossover courses: how are they formed? - page 2
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Not yet, Sergey. I haven't been interested in arbitrage until now, and I'm not even now. It doesn't seem to be our field.
2 joo: Of course, arbitration is sometimes technically possible. This was just an example.
2 Risk: I don't know how. Show me how to do it correctly, I would be grateful for the science.
You take ask from the pair in the numerator, bid from the pair in the sign, divide it and you get the cross rate ask. For sure it will be better than the real one, because brokerage companies are hungry too.
The arbitrage is impossible in practice and even more so in theory.
Neutron, I must have messed up here, forgetting that spread points are far from always related to the quid. I mean, I probably calculated the EURUSD sync. rate via CAD correctly, but I screwed up the rest.
2 Risk: the answer is not accepted, as it is not substantive.
First, it was the selling rate of the pair I was calculating, not the buying rate. And where and what counts for bid or ask, I understand.
"Arbitrage is impossible in practice, much less in theory." A very strange statement from a logical point of view. Secondly, arbitration is theoretically possible. Yes and practically too, but only in some places and with appropriate facilities.
I ask you to point out my mistakes exactly in my counting algorithm.
P.S. I will think it over and post a corrected table when I find errors.
Let's say....
we have an account in USD
we buy 100 Canadians at 1.03171+3p = 1.03201
as a result, we will spend (1/1.03201)*100 = 96.898 USD
for 100 Canadians we will buy Euro at 1.48785+7p = 1.48855
so we have (1/1.48855)*100 = 67.17947 euros
now we sell these Euros at the current rate of 1.44245 and get 96.903 USD
So we have less than 0.5 cent for every 100 USD.
If the cross spread were lower, we would gain something.
And the point is not even that arbitrage is not profitable, but that the spread for crosses will always be so that arbitrage is not profitable.
2 Risk: The answer is not accepted because it is not substantive.
Firstly, it was the selling rate I was counting, not the buying rate.
Secondly, arbitrage is theoretically possible. Yes and practically too, but only in some places and with the appropriate facilities.
I ask you to point out my mistakes exactly in my algorithm of calculation.
I agree, calculating cross bid knowing the algorithm for ask is an insurmountable task for you. Sorry, but I'm not a junior high school teacher.
This forum strikes me every time with its imbecility.
Risk, I've already seen your bland judgements on this forum. I haven't noticed anything in them other than super-cool pretensions. I have nothing to say to you.
Допустим....
у нас счет в USD
мы покупаем 100 канадцев по цене 1.03171+3п = 1.03201
в результате мы потратим (1/1.03201)*100 = 96.898 USD
дале за 100 канадцев мы покупаем евро по курсу 1.48785+7п = 1.48855
таким образом у нас есть (1/1.48855)*100 = 67.17947 евро
теперь эти еврики мы продаем по текущему курсу 1.44245 и получаем 96.903 USD...
You can't buy Canadians for dollars to spend on euros.
Вы не сможете купленные канадцы за долары потратить на евро.
You're right, that's why I wrote "Doputim" in the beginning.)
The point is that we are not converting one currency into another we are just trading the difference.
IMHO
The principles of cross rates formation do not differ from the principles of rates formation for major currency pairs. All the same laws of supply and demand.
ИМХО
Принципы формирования курсов кроссов, ни чем не отличается от принципов формирования курсов основных валютных пар. Все те же законы спроса и предложения.
Not really.
It is when there is not enough supply and demand, i.e. not enough direct transactions to convert one currency into another, that the cross rate is introduced.
Не совсем так.
Как раз в том случае когда не достаточно спроса и предложения, то есть нет достаточного количества прямых операций перевода одной валюты в другую и вводится кросс-курс.
I think the cross rate is not introduced anywhere, it just exists like other pairs.
The exchange rate of the major currency pair affects the cross rate, the cross rate affects the major pair, etc. Of course, due to trading volumes, the major currency pair is more likely to contribute more, but not always... I am pretty sure that during the crisis the fall of euro and the rise of yen was not an accident, it was the closing of long positions in euro, hence the movements of the major currency pairs (IMHO).