ttp://en.wikipedia.org/wiki/Currency_pair
Quote on Swiss Francs(CHF)
USD/CHF 09521-09836
CHF is base currency and USD is price currency
Could you clarify How to determine Base currency on a Quote ?
(numerator or denominator is Base currency ?)
Thanks
dude forget wikipedia! remember the CFAI rules only it’s not time to be smart about it
ECON Question on Qbank
Donna Ackerman, CFA, is an analyst in the currency trading department at State Bank. Ackerman is training a new hire, Fred Bos, a recent college graduate with a BA in economics.
Ackerman and Bos have the following information available to them:
Spot Rates
Bid Price
Ask Price
EUR/USD
€1.0000
€1.0015
GBP/USD
£2.0000
£2.0100
EUR/GBP
€0.3985
€0.4000
Ackerman and Bos are interested in pursuing profitable arbitrage opportunities for State Bank. What will be the profits from triangular arbitrage, starting with $1,000?
A)
$248.46.
B)
$243.78.
C)
$245.65.
Your answer: A was incorrect. The correct answer was B) $243.78.
The EUR/USD and GBP/USD rates imply that the arbitrage free cross rates for the EUR/GBP are: bid = €1.000/₤2.0100 = €0.4975 ask = €1.0015/₤2.0000 = €0.5008 Since the cross rates given (€0.3985 − €0.4000) are outside of the arbitrage-free cross rates, profitable arbitrage is available.
It takes too few euros to buy 1 pound, so we want our arbitrage trades to go in the direction that will cause us to sell overvalued euros for pounds at the ask rate of €0.4000. Start with $1,000. Use the $1,000 to buy euros (1,000 × €1.000/) = €1,000. Use the €1,000 to buy sterling (€1,000 / €0.4000/₤) = ₤2,500. Use the ₤2,500 to buy dollars (₤2,500 / ₤2.0100/$) = $1,243.78.
(Study Session 4, LOS 14.b)
I found something not quite right
EUR/GBP
€0.3985
€0.4000
----> mean 1 EUR = 0.3985 GBP or 1 GBP = 0.3985 EUR