In currency derivatives, how do you know which currency is foreign and which is domestic?

I just did the Practice Assessment Speckley and the first question asks for the currency forward price.

The spot we are given is USD/EUR. I thought that would mean that USD is the foreign, and EUR is the domestic a-la f/d convention. But the domestic is the US rate. Is there a rule that will tell me which is which?

I don’t have the assessment in front of me. You’re always buying or selling the currency in the denominator. Focus on this rule rather than price, base, foreign, domestic. If the fraction increases over time, it means that th currency in the denominator has strengthened. You might want to go to the site financialexamhelp123. It’s super helpful (and free).



1.5 USD/EUR means $1.5 for every Euro. It’s the opposite of real world quotes.

There is no F/D convention; quotes can be F/D or D/F. It depends on your point of view.

However, they’re always P/B. This doesn’t depend on your point of view.

For the purpose of the exam, the domestic currency is usually the first currency in the exchange rate quote; so If the quote is $0.82/EUR, the domestic currency here is the USD, while the EUR is the foreign currency.

Kindly try your hands on some questions, and let me know what if this works for you.


Respectfully, this isn’t a good rule of thumb, and it isn’t necessary.

Forget about domestic and foreign; concentrate on base currency and price currency.

Well, you might be correct, but it has worked wonders for me, and I have used it in solving several questions.