Three Point Arbitrage relies on the concept of "Relative Arbitrage" and was designed to take benefit of value disparities amongst three foreign money pairs. It is among the Foreign exchange Hedge Fund Methods used to capitalize on the triangular relationship between two hard forex pairs and their respective cross rates. This triangular relationship provides an effective supply for arbitrage alternatives resulting from the fact that the cross charge of two currencies don't at all times coincide with what the actual cross rate needs to be primarily based on the rate of the 2 dollar pairs in consideration. For instance, suppose we observe the following exchange rates for USDJPY, EURJPY, and EURUSD:
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