Forex Dilemma

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Insomniactill

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I tried to calculate INR-Europe exchange rate from INR-USD & USD-EURO exchange rate, but it is not exact. Why is this deviation in reality?
I read the concept of cross rates where USD is the vehicle currency and this should work. What actually works in reality?
 
Insomniactill wrote:
I tried to calculate INR-Europe exchange rate from INR-USD & USD-EURO exchange rate, but it is not exact. Why is this deviation in reality?
I read the concept of cross rates where USD is the vehicle currency and this should work. What actually works in reality?
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What are the rates and what was your calculation?
In reality, there shouldn’t be a deviation because that’s an easy arb opportunity. If there was such a deviation, people would’ve traded it already and it wouldn’t exist.
 
I got to know that the little deviation that I getting is offset by the transaction costs which do not allow arbitration to happen. The Ask spread from one exchange is always greater than the big exchange from the other. I hope I am right.
@mbaorcfa - Nice Article. Thanks.
 
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