Currency arbitrage, which price to use given 3 quotes

[difanchen]

Hi guys,
I don’t know if anybody gets confused on this, but it sure gives me a diffcult time:
Context: You are being offered 3 currencies where 1 is mispriced (I think everyone knows what I talking about at this point).
Ex:
EUR/USD: 0.7-0.7010
USD/GBP: 1.7-1.7010
EUR/GBP: 1.2-1.2010
ENUR/GBP (implied): 1.19-1.1924
In the event of an arbitrage, I know which direction to go: USD–>GBP–>EUR–>USD
But then which bid-ask do you use.
And now I am at this mechanical stage where I just use memorization: ASk price–>Bid Price–>Ask price.
Anybody can exaplin which price to use?

 

[difanchen]

Or did I justed asked an absolutely stupid question.
Of course all arbtriage will be: Buy–>Sell–>Buy, from your perspective.

 

[S2000magician]

difanchen wrote:Hi guys,
I don’t know if anybody gets confused on this, but it sure gives me a diffcult time:
Context: You are being offered 3 currencies where 1 is mispriced (I think everyone knows what I talking about at this point).
Ex:
EUR/USD: 0.7-0.7010
USD/GBP: 1.7-1.7010
EUR/GBP: 1.2-1.2010
ENUR/GBP (implied): 1.19-1.1924
In the event of an arbitrage, I know which direction to go: USD–>GBP–>EUR–>USD
But then which bid-ask do you use.
And now I am at this mechanical stage where I just use memorization: ASk price–>Bid Price–>Ask price.
Anybody can exaplin which price to use?

I already did: http://financialexamhelp123.com/triangular-arbitrage/.

 

[dwheaton]

^ never been to your site before S2000, it is quite impressive

 

[S2000magician]

dwheaton wrote:^ never been to your site before S2000, it is quite impressive

Thanks!
It’ll be more so as I get more articles written. At least, I hope that it will be.

 

[difanchen]

S2000magician wrote:

dwheaton wrote:^ never been to your site before S2000, it is quite impressive

Thanks!
It’ll be more so as I get more articles written. At least, I hope that it will be.

As always, you are the best, and the most valueable asset for this web and CFA institue as well.