  We develop the optimal trading strategy for a foreign exchange (FX) broker
who must liquidate a large position in an illiquid currency pair. To maximize
revenues, the broker considers trading in a currency triplet which consists of
the illiquid pair and two other liquid currency pairs. The liquid pairs in the
triplet are chosen so that one of the pairs is redundant. The broker is
risk-neutral and accounts for model ambiguity in the FX rates to make her
strategy robust to model misspecification. When the broker is ambiguity neutral
(averse) the trading strategy in each pair is independent (dependent) of the
inventory in the other two pairs in the triplet. We employ simulations to
illustrate how the robust strategies perform. For a range of ambiguity aversion
parameters, we find the mean Profit and Loss (P&L) of the strategy increases
and the standard deviation of the P&L decreases as ambiguity aversion
increases.
