i am confused with cross rates. how do you know whether to multiply across bid xbid or bid x ask see below 1. :won= 1012-1013 €: = 1.24969-1.25 calculate €:won 2.:R=2.2960-2.298 :won= 1012-1013 find R:won
it’s simple algebra it looks like my friend in this country
Audrey, depending if you were buying/selling . Example: Let’s say you have CAD and want to have EUR. This can be interpreted as follows: Sell CAD for purchase of USD, then sell USD for purchase of EUR. Mathematically, (CAD/USD)*(USD/EUR) = (CAD/EUR) For (CAD/USD) you are a buyer of USD so, you want to go off of the OFFER. For (USD/EUR) you are a seller of USD so, you go off of the BID. 1. (/w) \* (E/) = (w/) 2. (/w) / ($/R) = (R/w)
^ Nice.
:won= 1012-1013 €: = 1.24969-1.25 Just multiply the bid with the bid and the ask with the ask, which will give you the new bid-ask spread. The equation is (won/)\*(/€) = won/€ - € is the base currency. :R=2.2960-2.298 - Let’s name this bid1 & ask1 :won= 1012-1013 - Let's name this bid2 and ask2 You can divide the bid1 by ask 2 and ask1 by bid2. The lower is the bid and the higher is the ask. The second currency becomes the base currency, in this case the won. (R/) / (won/) = R$/Won - Won becomes the base currency PS - This is an oversimplified method from Schweser. Hope it helps 
Same Base Currency - Multiply Down (ie: Bid*Bid, Ask*Ask) Different Base Currency - Divide Across (ie: Bid/Ask, Ask/Bid)
jdane416, not sure that is totally correct. can you expand? I.e, there’s not mkt for CAD to EUR, you must transition through USD. So, where does 'same base currency" come in. Also is Bid/Ask implying the bid of (EUR/USD) divided by ask of (USD/CAD) for EUR/CAD?
jdane416 Wrote: ------------------------------------------------------- > Same Base Currency - Multiply Down (ie: Bid*Bid, > Ask*Ask) > Different Base Currency - Divide Across (ie: > Bid/Ask, Ask/Bid) this is backwards
You’re right… my mistake. It was too early in the morning - I usually remember it because of the D’s (multiply Down, Different base). TDIGZ, I’m at work or I’d give you a reference. But look in either Schweser/CFAI in the econ readings (prob 17 or 18) for more details. This has nothing to do with there being a market. The “Base” and “Counter” refer to the exchange rate notion of A:B = S (for reference to this look up Direct/Indirect Quotes in the Econ readings as well). IE: In the example used, "1. :won= 1012-1013; €: = 1.24969-1.25 " the base currencies are different and therefore to generate a cross rate you need to Multiply Down.
Gotcha.
just checking are the answers 1) 809.5 -810.60 2)440.38 -442.35
Maybe I am way off base… 1264.68628:1266.25 440.38294168842471714534377719756:441.20209059233449477351916376307
CP, you’re right… sorry for being “late”…just got to this topic last night…what a nightmare at first, but I remembered this post and AF really helped me again. these are my online classes! have a great weekend brave ones tigas