bid ask confusion

GBP:USD is 1.700 - 1.7010, to convert 1 million USD to GBP, which rate should one use? GBP:EUR is 1.200 - 1.000, to convert 1 millions GBP to EUR, which rate to use? Thanks.

remember, dealer always gets the best deal so he sells to you at highest rate and buys from you at the lowest rate

GBP:USD is 1.700 - 1.7010, to convert 1 million USD to GBP, which rate should one use? Bid = GBP 1.7000/$, Ask = GBP 1.7010 To convert $1 million: 1 million x (GBP 1.7000/) Remember the bank will give you the lesser amount, so it will not multiply by 1.7010.

GBP:USD=1.700-1.701 means 1 GBP=1.700 USD Bid, 1.701 USD Ask so if you are converting 1 Million USD - you would divide, use the 1/1.701 GBP:USD = USD/GBP …

If you’re buying…convert with the ask If you’re selling…convert with the bid

are you sure cpk?

I think cpk is right

CPK is right, the bank is SELLING you GBP so they will charge the higher rate.

GBP:USD=1.700-1.701 dealer will buy 1 GBP for 1.700 USD, dealer will sell 1 GBP for 1.701 USD so, to convert 1MM USD to GBP, i want to buy GBP. Means the dealer will have to sell me GBP. So i hand the dealer 1MM USD, he will return to me 1MM/1.701 in GBP. GBP:USD=USD/GBP think of “/” as “per” and the “:” as “in”

My mistake, I haven’t touched econ yet. I was referring to the notation: GBP:USD=1.700-1.701. Yes, that should be $1.7000/GBP, or GBP 1/$1.7000.

CP and ro are right. If I want to convert 1 millions USD to GBP, do i need to reverse the GBP: USD to USD:GBP, then apply the ask price?

You don’t have to reverse anything if you don’t want to. Just take the $1MM and either divide it by the current ask GBP/USD or you can take the reciprocal of 1.7010 and multiply by $1MM

I believe you divide by $1.7010. You have dollars, and want to sell dollars. If you set it up as a formula, you can’t multiply.

suny Wrote: ------------------------------------------------------- > GBP:USD is 1.700 - 1.7010, to convert 1 million > USD to GBP, which rate should one use? > > GBP:EUR is 1.200 - 1.000, to convert 1 millions > GBP to EUR, which rate to use? > > Thanks. i) 1.7010 ii) 1.2

for the second one i would use 1.00. Euro/GBP=1.00

Best way I find to think of this is the denominator currency is the “inventory” or “product” that the bank is selling. The numerator is the price they will buy BID and the price they will sell ASK. Thinking of it this way helps with triangular arbitrage as you are simply acting as a distributor. Buying inventory at lower prices and selling at higher prices.

You will use 1. 1.7010 2. 1.2

For the second one, I would use 1.2 assuming that is the ask quotation since you have have it listed on the left side.

Can you help me understand why the second one he would use the rate of 1.2? If he has 1 million gbp and uses 1.00 euro/gbp rate then he would get 1 million euro correct. If he uses the 1.2 euro/gbp rate to exchange his 1 million gbp he would get 1.2 million euro. I thought the one doing the exchange would always be at the disadvantage compared to the dealer and thus he would receive 1 million euro as this is less than the 1.2? Thanks for the help.

okiew5 Wrote: ------------------------------------------------------- > Can you help me understand why the second one he > would use the rate of 1.2? > > If he has 1 million gbp and uses 1.00 euro/gbp > rate then he would get 1 million euro correct. > > If he uses the 1.2 euro/gbp rate to exchange his 1 > million gbp he would get 1.2 million euro. > > I thought the one doing the exchange would always > be at the disadvantage compared to the dealer and > thus he would receive 1 million euro as this is > less than the 1.2? > > Thanks for the help. Thanks for pointing that out. I did not notice that. bpdulog, thanks to you too. The GBP:EUR is 1.200 - 1.000 is not possible (very low chances of being possible) since the bid price is higher than the ask price.