## Triangular Arbitrage using Bid Ask Quotes

Have you ever wondered how to determine how to compute the triangular arbitrage formula using bid and ask quotes? Using four simple rules it is possible to compute triangular arbitrage relationships using bid and ask prices. Three example computations for three different symbols are presented with an intuitive description of how to interpret the results in terms of identifying inefficiency, including the triangular arbitrage “risk free” opportunity, as well as the opportunity to transact at a better price using the synthetic than the underlying, even when no real arbitrage opportunity exists.

Triangular Arbitrage with Bid Ask Quotes

## Calculate Triangular Arbitrage Lot Size

Have you ever wondered how to correctly size positions between the underlying pair and its synthetics to eliminate or hedge directional risk? This article describes how to calculate triangular arbitrage lot size to fully hedge all exposure when initiating a triangular arbitrage trade. The arbitrage trade is at the heart of all good strategies that take advantage of inefficiency. In the forex market this means triangular arbitrage, so understanding how to correctly size positions to eliminate or minimize individual currency risk is very important.

## Triangular Arbitrage 101

Triangular arbitrage, also known as tri arb, exploits price inefficiency by trading in three currency pairs to produce a risk-free transaction in theory. This article explores the basics of triangular arbitrage as they relate to retail forex traders, how to work out synthetic pairs for each currency pair, as well as some of the practicalities of applying the tri arb concept in the currency markets.