Three-point arbitrage, also known as indirect arbitrage, is also called triangular arbitrage, that is, using the exchange rate differences of three different foreign exchange markets, buying and selling foreign exchange in three foreign exchange markets at the same time to obtain the exchange rate difference.

Calculation method triangle arbitrage calculation: triangle: a/bxc/AXB/c > 1 starts with b buying a and ends with c buying b.

Triangle: Replace the three equations with the same pricing method, and then multiply by the coefficient. If the result is greater than 1, do it in the direction of multiplication; If it is less than 1, do it in the direction of division.

For example:

New york market: 1 USD =7.82 HKD. The pricing method here is similar to (HKD/ USD).

Port and city: 1 HKD =0.97 RMB (RMB /HKD)

Shanghai market: 1 USD =6.75 RMB (RMB/USD)

First, change it to the same pricing method, that is, convert it into (HKD/USD) * (RMB/HKD) * (USD/RMB). In the above example, we need to convert the Shanghai market into: 1 RMB =( 1/6.75) USD. (USD/RMB)

Start to calculate: (HKD/ USD) * (RMB /HKD) * (USD/RMB) = 7.82 * 0.97 * (1/6.75) =1.125 >1so multiply.

In addition, if we use the pricing method of (USD /HKD)*(HKD/ RMB) * (RMB/USD), we need to convert the Hong Kong market and the new york market.

New york market: 1 HKD =( 1/7.82) USD, (USD /HKD).

Port and city: 1 RMB =( 1/0.97) HKD, (HKD/ RMB),

Start calculation: (USD /HKD)*(HKD/ RMB) * (RMB/USD) = (1/7.82) * (1/0.97) * 6.75 = 0.8899.