Base v Counter Rates

Hi Everyone,

Hope you all are progressing well with your studies.

Quick question; There are quite a few formulas in Level 2 which involve base v counter rates (e.g. relative PPP, IR Parity etc) and I seem to remember one of them having the base rate on the top instead of the bottom like the rest of them.

Is someone able to tell me quickly which one that was because everything is starting to look the same?

Thanks heaps and good luck!

I can not recall any that have base on top. IRP, PPP Forwards, Futures and Fischer all have base on bottom.

So Currency Forward Price and Covered IR Parity are the same formula?

except that forward uses compounding so its (1+R)^T in both top and bottom. thats how I recall it anyway.


Maybe you’re thinking of the asset market approach formula? Pg 662 vol. 1