FOREIGN EXCHANGE RATES
Domestic Currency Units Direct Rate =
Foreign Currency Unit
for example, USD 0.7948/C$
FOREIGN EXCHANGE RATES
Foreign Currency Units Indirect Rate =
Domestic Currency Unit
for example, Mex$ 10.966/USD
FOREIGN EXCHANGE RATES
Cross (Inferred) Rate If we know the rate of exchange between U.S. dollars and Canadian dollars, as well as the exchange rate between US dollars and Mexican pesos, we can infer the exchange rate between Canadian dollars and Mexican pesos:
USD 0.7948/C$ * Mex$10.966/USD
= Mex$8.7158/C$
LATERAL ARBITRAGE
Canada
Mex$8.869/C$ USD 0.7948/C$
United States
Mexico
Mex$10.966/USD
LATERAL ARBITRAGE
Since the quoted rate between the Mexican peso and the Canadian dollar is higher than it should be, we want to sell at that quoted rate.
USD 0.7948/C$*Mex$10.966/USD