When calculating cross rates when given bid-ask quotes, do we take the mid-point of each of the two bid-ask quotes to derive the third? Or do we do something fancy that involves up the bid and down the ask?
mfbarbmff Wrote:
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> When calculating cross rates when given bid-ask
> quotes, do we take the mid-point of each of the
> two bid-ask quotes to derive the third? Or do we
> do something fancy that involves up the bid and
> down the ask?
I think people overcomplicate this issue with regards to learning formulas and tricks, where all thats required is developing some good intuition. All you really need to do is understand what the Quote is saying.
The quote USD/GBP at 1.6 1.7 is saying that if you need to convert GBP to USD, the broker will give you 1.6 USD, but will charge you 1.7 USD.