Currency & Forex
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Triangular Arbitrage

A riskless profit captured when three currencies’ cross rates are momentarily inconsistent.

Formula

Profit=(1RAB×RAC×RCB)−1Profit = \left(\dfrac{1}{R_{AB}} \times R_{AC} \times R_{CB}\right) - 1

Variables

R_{AB}Rate A to B
R_{AC}Rate A to C
R_{CB}Rate C to B

Example

Rates misaligned by 0.2% → 0.2% riskless gain

Did You Know?

High-frequency trading firms close these gaps in milliseconds, so they rarely survive long enough to exploit by hand.

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