Triangular Arbitrage-Cont’d Three things are important to note about triangular arbitrage. First, to bean effective arbitrage, the transactions must all be conducted simultaneously. Second, as traders place orders to conduct the arbitrage, market forces are created that bring the quoted direct cross-rate back into alignment with the indirect cross-rate. The third point is that the arbitrage need not start by using the euro to purchase pounds. The triangular arbitrage would be profitable starting from any of the currencies, as long as we trade in the same direction and go completely around the triangle.
