Question 4: Assume you are a trader in foreign currencies and you look for arbitrage. From the quote screen on your computer terminal you observe the exchange rate quotations below. (Numbers should be rounded to 4 decimal places. Please note that your answers will be worthy zero mark if they do not include currency symbols £ $ €.)Bank QuotationsRateCiti Bank :$1.8403/£UBS :$1.3225/€Barclays Bank :€1.3647/£ a. Explain what a triangular arbitrage is. What is a condition that will give rise to a triangular arbitrage opportunity? (1.5 marks)b. What €/£ price will eliminate triangular arbitrage? (1 mark) c. How you can make a triangular arbitrage profit by trading at these prices? What is the profit? Explain and discuss your calculations. (4 marks)
