Final answer:
The potential profits gained from triangular arbitrage will decline substantially after accounting for the bid-ask spread.
Step-by-step explanation:
After accounting for the bid-ask spread, the potential profits gained from triangular arbitrage will decline substantially compared to the potential profits if the bid-ask spread were ignored.
In triangular arbitrage, traders take advantage of differences in exchange rates between three currencies to make a profit. However, the bid-ask spread, which represents the difference between the buying and selling prices of a currency, reduces the potential profits.
For example, if the bid-ask spread is 0.05 and a trader wants to exchange USD to EUR to GBP and back to USD, the bid-ask spread will reduce the profits gained from the difference in exchange rates.