Lect09-International Financial Markets-VineyChptr15

Giving in this way the dealer will make a profit the

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Unformatted text preview: for the receiving/buying that (base) currency (Always remember that dealer receiving/buying always buy low and sell high) • the higher rate will always be the dealer’s rate to sell off the /giving always the (base) currency. /giving • In this way, the dealer will make a profit (the spread). If In the rates were interpreted as the other way around, the dealer would always make a loss !! dealer • So beware text or other discussion when the rates are So direct or indirect and/or simply shown together and may not be in a set order of a dealer’s buy/sell i.e. they may be shown as sell/buy !! be 12 • Pricing/quoting conventions – The convention in world currency markets is to quote The convention exchange rates as units of home currency per whole unit of the foreign currency (most often against US$1). This is called the direct method. (i.e. home CCY as “money” – split units) direct • For example in Europe, the exchange rate between the Euro For and US$ will normally be quoted as t...
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