Triangular arbitrage


Also found in: Wikipedia.

Triangular arbitrage

Striking offsetting deals among three markets simultaneously to obtain an arbitrage profit.

Triangular Arbitrage

A series of three currency trades in which the exchange rates do not exactly match up. In triangular arbitrage, an arbitrageur may profit from the inefficiency in pricing of the exchange rates. The process of triangular arbitrage involves converting one currency to another, then to a third, then back to the first. Opportunities for this are rare because the currency markets are so liquid as to provide almost perfect efficiency. It ordinarily requires advanced computer software to accomplish it successfully.
References in periodicals archive ?
In foreign exchange markets, absence of triangular arbitrage implies a deterministic relationship between any pair of dollar rates and the corresponding cross rate.
This point can be easily seen in a three-point arbitrage or triangular arbitrage.
Triangular arbitrage exploits the relative price difference between one currency and two other currencies.
Conditions for no triangular arbitrage with transaction costs: a pedagogical note.
However, in 1901 gold shipments to London ceased and were replaced by triangular arbitrage shipments through Paris.