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IAmNeil

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tT
发表于 2011-7-11 19:28 | 只看该作者
In the Econ section, we have:
Forward rate * (1+DC) = Spot * (1+FC)

in the Derivatives and PM sections, we have:
Fwd * ( 1+ FC) = Spot * (1+DC)

the DC and FC are switched (domestic currency and foreign currency). why are they different? is it because the way the currency is quoted (direct versus indirect quotes)?

 

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Sportsman

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发表于 2011-7-11 19:28 | 只看该作者
Yes, you have to define how the currency is being quoted. You need to be careful if you are talking about prices or exchange rates as well. I just remember my base case of direct quotes of exchanges, adjust (invert) if needed:

F _(dom/for) = So_(dom/for) * [(1 + i_dom)/(1 + i_for)]

With this formula my exchange rate is domes/for, and my adjusting multiplier is (1+i_dom)/(1+i_for)

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troymo

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发表于 2011-7-11 19:28 | 只看该作者
Thanks SeesFA.

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