Program Description

Forex Arbitrage Calculator allows to determine risk free arbitrage opportunities on forex cross rates.

Forex Arbitrage is an arbitrage among real rates and synthetic cross rates in different local markets.

For example, suppose a trader has accounts with forex brokers in New York, Tokyo, and London. As far as local quotes are determined by local players, there are sometimes arbitrage opportunities among different locations. In our case the real rates are gbp/usd 1.6388 1.6393 (NY), eur/usd 1.1832 1.1837 (Tokyo), and the cross rate eur/gbp is 0.7231 0.7236 (London)

In such situation exists risk-free arbitrage opportunity with estimated profit equal to $13.1 on a mini contract. Indeed buying 100,000 EUR for $118,370 (10 mini lots or a one standard lot), and selling 100,000 EUR for 72,310 GBP, and selling 72,310 GBP for $118,501 gives zero exposures in EUR and GBP with profit of $131.

Such arbitrage is possible if the trader's positions are netting (clearing) by some "clearing house".