How can this be?

This may be a totally crazy question but......
USD/CHF=1.1550
CHF/JPY=86.75
USD/JPY=100.24

What is to stop anyone buying CHF with Yen, exchanging CHF for USD then changing the USD back to JPY and making a fortune? Spreads are nowhere near as large as the discrepency in these rates!


http://img520.imageshack.us/img520/2...mysteryah1.jpg

You have not converted the base currency. Work through it like so:

You pay out 86 Yen to acquire 1CHF.

With 1CHF you are able to buy 0.866 [1/1.550] USD

With the 0.866 USD you can purchase 86 Yen.

The simplest explanation is almost always the right explanation - you made a mistake, not the existence of a massive gap in the forex market that no-one had considered. The exchange rates are a tautology, they must equal each other.

Oooppppps.

I was thinking about this the other way around as 1CHF being 1.1550 USD.

hard to work these figures out when I am constantly thinking in Yen.



Thought it couldn't be that easy.