Implied inverse forex pair bid/ask spread
Implied inverse forex pair bid/ask spread
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Blaze · External communityPost link
External question — Quantitative Finance Stack Exchange
Author: Blaze
Original post: https://quant.stackexchange.com/questions/21379
License: CC BY-SA 3.0 — https://creativecommons.org/licenses/by-sa/3.0/
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I just wanted to make sure this was correct:
If AUD/USD has bid ask of 0.71999/ 0.72032, that implies there is another (theoretical) pair USD/AUD which has a bid ask of (1/aud_usd_ask) / (1/aud_usd_bid) .
The reason for the theoretical pair is that if my quote currency profits are in AUD, I only have the AUD/USD bid/ask to convert back into USD and I want to make sure I have the correct bid/ask spread for the inverse pair that I'm going to use.
Ie, if I have a profit of 1000 AUD, then to convert back into USD by purchasing USD / selling AUD, I would use 1000 AUD / (1/AUD_USD_BID)
and if I have a loss of 1000 AUD, then I'd need to buy the AUD back and sell my USD in my account. For that I would use 1000 AUD / (1/AUD_USD_ASK)
Correct?? Thanks!!
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arodrisa · External communityPost link
External answer — Quantitative Finance Stack Exchange
Author: arodrisa
Original post: https://quant.stackexchange.com/a/21381
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You are correct, but in finance, you should avoid talking about the theoretical pair you are talking about as you will make it even more confusing.
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Quoted from Forex.com.bd-Editorial External question — Quantitative Finance Stack Exchange Author: Blaze Source score (net votes, not local likes): 0 Original post: https://quant.stackexchange.com/questions/21379 License: CC BY-SA 3.0 — https://creativecommons.org/licenses/by-sa/3.0/ Adaptation: HTML converted to plain text; contact email addresses removed. I just wanted to make sure this was correct: If AUD/USD has bid ask of 0.71999/ 0.72032, that implies there is another (theoretical) pair USD/AUD which has a bid ask of (1/aud_usd_ask) / (1/aud_usd_bid) . The reason for the theoretical pair is that if my quote currency profits are in AUD, I only have the AUD/USD bid/ask to convert back into USD and I want to make sure I have the correct bid/ask spread for the inverse pair that I'm going to use. Ie, if I have a profit of 1000 AUD, then to convert back into USD by purchasing USD / selling AUD, I would use 1000 AUD / (1/AUD_USD_BID) and if I have a loss of 1000 AUD, then I'd need to buy the AUD back and sell my USD in my account. For that I would use 1000 AUD / (1/AUD_USD_ASK) Correct?? Thanks!!
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