triangular arbitrage



  • arbitrage among three currencies. For example (letting x/y be the currency x per unit of currency y exchange rate), if $/¥ > ($/£)(£/¥), then an arbitrager can make a profit buying £ with $; buying ¥ with those £; and then selling those ¥ for $.


  • The process of performing three forex transactions in three related currency pairs as simultaneously as possible to lock in a profit. Triangular arbitrage is most commonly used by professional traders in highly liquid cross currency pairs to keep related markets in line. An example in EUR/JPY might involve selling EUR/JPY, buying EUR/USD and buying USD/JPY when market conditions indicated that a net gain is available to be locked in.