Week 2 - Exchange rate basic formulas

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Last updated 11:08 AM on 5/4/26
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9 Terms

1
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Formula to measure FX Deprecitaiton/Apprecitation

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2
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<p>Worked Example of FX Depreciation/Appreciation</p>

Worked Example of FX Depreciation/Appreciation

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3
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<p>Basic FX cross rates formula and example. </p><p>Both divided to the same currency. </p>

Basic FX cross rates formula and example.

Both divided to the same currency.

If both are divided by the same currency then divide

<p>If both are divided by the same currency then divide</p>
4
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<p>Basic FX cross rates formula example. </p><p>Not divided by the same currency. </p>

Basic FX cross rates formula example.

Not divided by the same currency.

If both arent divided by the same currency then multiply.

<p>If both arent divided by the same currency then multiply. </p>
5
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Defintions of bid and ask price

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6
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<p>Calculating bid and ask price for FX cross rates in the same currency. </p><p>Implied Bid Price (Sell Euros for GBP)</p><p>Implied Ask Price (Buy Euros with BGP)</p>

Calculating bid and ask price for FX cross rates in the same currency.

Implied Bid Price (Sell Euros for GBP)

Implied Ask Price (Buy Euros with BGP)

Bid: worst bid/diagonal ask

Ask: worst ask/diagonal bid

<p>Bid: worst bid/diagonal ask </p><p>Ask: worst ask/diagonal bid</p>
7
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<p>Calculating bid and ask price for FX cross rates in different currency. </p>

Calculating bid and ask price for FX cross rates in different currency.

In this case you just mutiply bid x bid and ask x ask.

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<p>What is a spread? </p><p>Formula to calulate Bid-Ask spread. </p><p>Worked Example. </p>

What is a spread?

Formula to calulate Bid-Ask spread.

Worked Example.

The difference between the ask rate and the bid rate. Dealers can make their profit from the spread.

<p>The difference between the ask rate and the bid rate. Dealers can make their profit from the spread. </p><p></p>
9
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What does a narrow spread and a wide spread tell us about the market.

Narrow spread means a deep liquid market but a wide spread menas low liquidity and heightened uncertainty.