> B) quotes the domestic currency per unit of foreign currency: DC/FC. Like I mentiond above: it’s a direct quote for the foreign currency *only* if the home currency is on top, I think I got it, but man this is some weird convention.
that q is not contradictory. says the same thing. direct quote- DC/FC
planner and banni, you need to rethink this. It’s not as “direct” as you think.
this one doesn’t really take that much thinking. i only have about 10 brain cells left- this will not occupy one of them.
ok, here is a test: For a Japanese investor, clasify the following as direct or indirect quotes for the yen: 1) JPY 112/USD 2) USD : JPY = 88 3) GBP 0.08565/JPY 4) GBP : JPY = 170 For an American investor, clasify the following as direct or indirect quotes for the USD: 1) JPY 112/USD 2) USD : JPY = 88 3) GBP 0.8215/USD 4) USD : JPY = 120
1st question direct quotes in Yen…1,2,3 2nd question direct quotes in USD…none
For a Japanese investor, clasify the following as direct or indirect quotes for the yen: 1) JPY 112/USD DIRECT 2) USD : JPY = 88 DIRECT 3) GBP 0.08565/JPY INDIRECT 4) GBP : JPY = 170 DIRECT For an American investor, clasify the following as direct or indirect quotes for the USD: 1) JPY 112/USD INDIRECT 2) USD : JPY = 88 INDIRECT 3) GBP 0.8215/USD INDIRECT 4) USD : JPY = 120 INDIRECT any other brain busters this AM?
If your currency rate is in the form DC/FC, it is a direct quote to the domestic investor. If the rate is in FC/DC, then it is an indirect quote to the domestic investor. From a market maker’s perspective, the form Base : Counter is always used. It is always a direct quote from the perspective of the Counter and an indirect quote from the perspective of Base. The tricky part is that from a market maker’s perspective, there is no such concept as “domestic” and “foreign”. There are only base and counter currencies. So much for notation. Such a pain in the butt.
Although thinking foreign and domestic gets messy, I just think a:b b/a direct quote for whatever is on top…so if I see a b/a you know its direct for currency b, or I rewrite it as a:b, and know that whatever the second currency is (the one after the : ) is the direct one.
planner, > 1st question > direct quotes in Yen…1,2,3 Sorry, all are indirect quotes for the yen. > 2nd question > direct quotes in USD…none Sorry, all are direct quotes for the USD. banni: > 1) JPY 112/USD DIRECT > 2) USD : JPY = 88 DIRECT > 3) GBP 0.08565/JPY INDIRECT > 4) GBP : JPY = 170 DIRECT Sorry, all are indirect quotes for the yen. > 1) JPY 112/USD INDIRECT > 2) USD : JPY = 88 INDIRECT > 3) GBP 0.8215/USD INDIRECT > 4) USD : JPY = 120 INDIRECT Sorry, all are direct quotes for the USD. I know, it’s getting ridiculous…Feel free to debate. This is what I understand from the defintions.
I don’t think a debate is necessary, but I do think you need to review direct and indirect. A direct quote in the USD is stated like this: USD/JPY and JPY:USD
bannisja, planner +1 CFAI explains perfectly well and think a quick recap can help. The confusion I think comes from the fact that the “:” system is counter intuitive because mathematically when you say 1.2cad/usd you’d understand you need 1.2 Canadian dollars per unit of USD makes more sense. but… If you look at quotation systems they are using the “:” equivalent “/” sign instead. an example of such is http://www.forex-markets.com/quotes.htm now looking at that page you clearly know that EUR/USD = 1.3492 doesnt mean it takes that much euros per dollar but rather 1.3492$ for each euro. in any case CFAI book is just amazing at explaining things.
QuantJock_MBA Wrote: ------------------------------------------------------- > If you live in the USA, this is an indirect quote > for the dollar. > > If you live in GB, this is a direct quote for the > GBP. I think you have this switched $0.555/GBP is: USD / GBP is direct for someone who lives in the USA
just remember . . . direct is always how much of YOUR currency you have to give up we use direct everyday when we buy a candy bar , etc if someone tried to charge you 3000 zimbabwe dollars for a hot dog on the street in NYC, just yell HEY FOOL! THATS INDIRECT!!! it will set the hot dog guy straight
Folks, yeah I wish they would do it my way too, but that’s not what it is. I won’t post on this anymore (rest assured cpk), but urge everyone to read the middle of page 551 of CFAI book 1. Cheers. Man! When people don’t want to understand something, they fight it every which way, and steer the solution their way.
I can rest assure that the following are correct. There is no debate about it. Period! For a Japanese investor, clasify the following as direct or indirect quotes for the yen: 1) JPY 112/USD DIRECT 2) USD : JPY = 88 DIRECT 3) GBP 0.08565/JPY INDIRECT 4) GBP : JPY = 170 DIRECT For an American investor, clasify the following as direct or indirect quotes for the USD: 1) JPY 112/USD INDIRECT 2) USD : JPY = 88 INDIRECT 3) GBP 0.8215/USD INDIRECT 4) USD : JPY = 120 INDIRECT
When we have the BID and ASK Is it safe to use the if multiply, lower number, if divide, higher number rule? (Rather than figuring out if we are on the buy side or the sell side?)
I can’t believe this simple question turned into this ridiculously long discussion. I wish I could have the minute of my life back that I just spent reading it.
swaption, > I can rest assure that the following are correct. There is no debate about it. Period! > For a Japanese investor, clasify the following as direct or indirect quotes for the yen: > 1) JPY 112/USD DIRECT Let’s just take the first one. How could this be a direct quote for the yen? This is the price of $1 in Japanese yen. If you go to a forex shop in Tokyo, you might see a dollar bill affixed to the wall with a price tag of 112 yen. You can buy the U.S. dollar for 112 yen. This is not a direct quote for the yen, buddy.
Direct means just what philip.platt said: it is the equivalent of how many units of domestic you need to give up for 1 unit of foreign. (DC/FC) For the Japanese investor, his domestic currency is the yen, so JPY 112/USD means if I am a Japanese investor, I have to give up 112 Yen for 1 USD. This is the definition of Direct quotation. “Quotes using a country’s home currency as the price currency (e.g., EUR 0.63 = USD 1.00 in the euro zone) are known as direct quotation or price quotation (from that country’s perspective) [1] and are used by most countries. Quotes using a country’s home currency as the unit currency (e.g., EUR 1.00 = USD 1.58 in the euro zone) are known as indirect quotation or quantity quotation and are used in British newspapers and are also common in Australia, New Zealand and the eurozone. * direct quotation: 1 foreign currency unit = x home currency units * indirect quotation: 1 home currency unit = x foreign currency units” http://en.wikipedia.org/wiki/Exchange_rate