ryan wrote:Michal, you graphs are very encouraging even if they do use data which has been 'articifically' created in part.
I have been wondering for a while if we can dervive a $ figure value from the FPI differential? Is this possible?
This is a good question. Strange no body figured out this before.
In order to have a triangular arbitrage situation, in other words to be able to:
Sell $1 and buy JPY, sell JPY and buy EUR, sell EUR to buy back USD with a profit it is necessary that:
$1* USDJPY (bid) / EURJPY (ask) * EURUSD (bid) > $1.
USDJPY (bid) / EURJPY (ask) * EURUSD (bid) >1.
or
FPI>1
FPI = dollar amount at the end of transactions for 1 dollar invested
In the other case in order to:
Sell $1 and buy EUR, sell EUR and buy JPY, sell JPY to buy back USD with a profit:
$1 / EURUSD (ask) * EURJPY (bid) / USDJPY (bid) > 1$
1 / EURUSD (ask) * EURJPY (bid) / USDJPY (bid) > 1
or
EURUSD (ask) * 1/EURJPY (bid) *USDJPY (bid) < 1
or
FPI<1
-FPI = dollar amount at the end of transactions for 1 dollar invested