标题: Question on Currency rate convention [打印本页] 作者: Zesty 时间: 2013-4-4 08:25 标题: Question on Currency rate convention
So for Level III, the CFA uses only the direct quote as far as I’ve seen. I have a question on the convention used though…
Let’s say you’re a US company, with operations in the eurozone. You expect to receive 1,000,000 euros in 3 months. The current 3-month forward quote is 1.50 USD/EUR. If you want to fully hedge, is the convention that you would go long or short the 1.50 USD/EUR contract?作者: Chuckrox 时间: 2013-4-4 08:29
short euros in the contract作者: Viceroy 时间: 2013-4-4 08:33
I get that…I’m saying if a dealer came to me saying “I’m offering 1.50 USD/EUR, do you want to go long or short?”作者: Analyze_This 时间: 2013-4-4 08:49
Yes, you always go long (or short) the currency in the denominator….so if you are a US investor receiving EUR income, you want to sell EUR forwards for a USD/EUR quote or buy USD forwards for a EUR/USD quote.
I work with currencies all day long in my job and I can assure you that the CFA stuff on currencies is the most confusing stuff that I have ever seen. I drives me insane…..
