Can I just get some confirmation on the formats, especially for use in the interest rate parity formulas. FC/DC? DC:FC? Are those what we will see on the exam?
Yea DC:FC = FC/DC
DC:FC = indirect, the units for any numbers given are FC/DC. “One unit of DC, buys X units of the FC”. I think I read in the CFAI material, DC:FC is what will be on the exam. But that was in the economics section. Who knows what we’ll see for FSA, Equities, or Derivatives.
The quotation should not be a problem as long as you know DC:FC = FC/DC The direct method is self explanatory. Only thing to remember is you must use the correct rate to price Currency forward/future contracts