Triangular Arbitrage FX Interview Guide
Triangular arbitrage FX interview guide for currency triangles, cross rates, bid-ask spreads, execution, latency, costs, and examples.
Candidates discussing no-arbitrage checks across FX pairs.
Triangular arbitrage checks cross rates
A currency triangle compares direct and implied exchange rates across three pairs. The calculation must use the correct bid and ask sides.
Spreads usually remove toy opportunities
An apparent discrepancy using mid prices may disappear after bid-ask spreads, fees, latency, and executable size are included.
Concrete example
EUR/USD and USD/JPY imply a EUR/JPY cross rate, but a tradable loop must buy and sell at the correct executable quotes after costs.
Execution risk remains
Even if quotes imply a gain, the legs may not execute simultaneously or at displayed size. Latency and stale quotes can erase the opportunity.
Common mistakes
Candidates often multiply mid rates and call it arbitrage. Strong answers use bid/ask, units, and execution constraints.
Practice the pattern
Use the LeetQuidity curriculum and calibration to turn this topic into a focused practice plan.