Econ IRP vs. Derivatives IRP currency, believe, appears

btcapital

Could someone confirm if my belief is true:
So it appears that the IRP formula in econ is designated as: F/S=(1+Rfc)/(1+Rdc)…but I believe we are given the F or S rate as an indirect quote - DC:FC.
In the Derivatives section on forwards the IRP formula is: F/S=(1+Rdc)/(1+Rfc)…but I believe we are given the F or S rate as a direct quote FCC.
Is this correct?
If we get an IRP problem in econ are we to assume (if not told which currency is DC) that the currency quoted as a:b, the “a” currency would be the domestic currency.
And if we get an IRP problem in derivatives are we just to assume that the quote is a direct quote since this seems to be the standard way to quote?

SkipE99

Your formulae seem correct.
‘b’ would be the domestic currency, I think
I don’t think we should assume - the question should be clear, stating where the investor is from(domestic) where where is the investment done(local).

joehogue

Are you sure about that? I thought “a” was the domestic currency under the quote a:b in the Econ reading…And i’m pretty sure I’ve seen problems where there is no mention of a person and what country they’re from. You have to base it off of the quote, which is why i want to make sure what I stated above is correct…

d2rockstar

I might be missing something, but I usually convert whatever the question gives into the format I’m most comfortable with. So I set it up as Currency A over Currency B, then use Currency B’s interest rate in the numerator and Currency A’s in the denominator. Then you get the answer in terms of Currency A/Currency B, and can reformat that to answer the question.

pennyless

i agree with cornbread. post a question that doesnt show which is the domestic currency…

Palantir

If the DC is on top, you put the DC rate on top. The only exception is when calculating “real” numbers.