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Currency Arbitrage Problem On Excel Solver

The document shows exchange rates between five currencies - US dollar, euro, British pound, Japanese yen, and Kuwaiti dinar. It includes a currency arbitrage model and example that computes optimal transactions between currencies to achieve the highest rate of return. The bottom table shows the initial solution with no transactions resulting in a -100% rate of return, highlighting no opportunity for arbitrage between the given exchange rates.

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Zia Jan
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Download as XLSX, PDF, TXT or read online on Scribd
989 views

Currency Arbitrage Problem On Excel Solver

The document shows exchange rates between five currencies - US dollar, euro, British pound, Japanese yen, and Kuwaiti dinar. It includes a currency arbitrage model and example that computes optimal transactions between currencies to achieve the highest rate of return. The bottom table shows the initial solution with no transactions resulting in a -100% rate of return, highlighting no opportunity for arbitrage between the given exchange rates.

Uploaded by

Zia Jan
Copyright
© © All Rights Reserved
Available Formats
Download as XLSX, PDF, TXT or read online on Scribd
You are on page 1/ 2

Exchange rates: $ € £ ¥ KD

$ 1 0.769 0.625 105 0.342 Currency arbitrage model


€ 1.30039 1 0.813 137 0.445 Example 2.3-2
£ 1.6 1.230012 1 169 0.543
¥ 0.009524 0.007299 0.005917 1 0.0032 Data entered manually
KD 2.923977 2.247191 1.841621 312.5 1 Computed entries (see bottom table)

Initial Objective Constrs.


Solution xij $ € £ ¥ KD Amt out Amt in I y out-in=0
$ 0 1.462058 0 0 5 6.462058 6.552381 5 5.090323 -4.67E-10
€ 0 0 0 0 3 3 3 0 0 3.84692E-11
£ 3.5 0.931495 0 0 0 4.431494 4.431495 0 0 1.43776E-10
¥ 100 100 100 0 0 300 300 0 0 0
KD 0 0 2.085 0.96 0 3.045 3.045 0 0 0
Amt in 6.552381 3 4.431495 300 3.045
Rate of return= 1.8065%

Transactions limit $ € £ ¥ KD Note: By selecting any cell in J10:J14 to represent I


$ 5 5 5 5 5 and any cell in K10:K14 to represent y, you can specify
€ 3 3 3 3 3 any two currencies as input and output. You will then
£ 3.5 3.5 3.5 3.5 3.5 need to change Target Cell in Solver Parameters
¥ 100 100 100 100 100 and Rate of return formula in J16, In J16, convert to one
KD 2.8 2.8 2.8 2.8 2.8 currency if input and output are different currencies.

Cell Formula Copy to


B3 =1/OFFSET($B$2,0,ROW($A1)) B4:B6
C4 =1/OFFSET($C$3,0,ROW($A1)) C5:C6
D5 =1/OFFSET($D$4,0,ROW($A1)) D6
E6 =1/F5
B15 =SUMPRODUCT(B2:B6,B10:B14) C15:F15
H10 =SUM(B10:F10) H11:H14
I10 =OFFSET($A$15,0,ROW(A1)) I11:I14
L10 =K10+H10-I10-J10 L11:L14
Exchange rates: $ € £ ¥ KD
$ 1 0.769 0.625 105 0.342 Currency arbitrage model
€ 1.30039 1 0.813 137 0.445 Example 2.3-2
£ 1.6 1.230012 1 169 0.543
¥ 0.009524 0.007299 0.005917 1 0.0032 Data entered manually
KD 2.923977 2.247191 1.841621 312.5 1 Computed entries (see bottom table)

Initial Objective Constrs.


Solution xij $ € £ ¥ KD Amt out Amt in I y out-in=0
$ 0 0 5 -5
€ 0 0 0 0 0
£ 0 0 0 0 0
¥ 0 0 0 0 0
KD 0 0 0 0 0
Amt in 0 0 00 0
Rate of return= -100.0000%

Transactions limit $ € £ ¥ KD Note: By selecting any cell in J10:J14 to represent I


$ 5 5 5 5 5 and any cell in K10:K14 to represent y, you can specify
€ 3 3 3 3 3 any two currencies as input and output. You will then
£ 3.5 3.5 3.5 3.5 3.5 need to change Target Cell in Solver Parameters
¥ 100 100 100 100 100 and Rate of return formula in J16, In J16, convert to one
KD 2.8 2.8 2.8 2.8 2.8 currency if input and output are different currencies.

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