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This seems pretty basic, assuming no arbitrage: $$X^{EUR}_{USD}(t+1) = X^{EUR}_{JPY}(t+1)/X^{USD}_{JPY}(t+1) = (1.2*X^{EUR}_{JPY}(t))/(1.25 * X^{USD}_{JPY}(t)) = 0.96 * X^{EUR}_{JPY}(t)$$ So EUR/USD decreases by 4%.

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A CFO typically is not involved in managing risk, though that's not always the case. If your hypothetical CFO is involved in the day-to-day managing of FX risk, the following could be useful: MtM VaR & Stressed VaR Expected shortfall Correlation between traded currency pairs Sensitivities (Greeks) If your hypothetical CFO isn't involved in the ...

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For business purposes, a CFO/CEO typically won't be interested at low-level modeling. Metrics such as: Maximum portfolio gross/net exposure (hence gross/net leverage) Maximum per trade size per product Maximum intraday exposure per product are probably among the more important ones for business decisions.

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Offer rates for options and currency futures. Upcoming publications for economic indicators for short term FX exposure. Future interest rate decisions for long term exposure. Regression for predicting trends. An equation I made for potential risk exposure: x = Days of exposure. p = Current price. delta = Historical daily price changes. Subscript is how ...

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Yes, you can just invert (i.e. 1/x) the EURUSD quotes to get the USDEUR bid and offer, as you did in your example. Deposit and loan rates are really just bids and offers for deposits. The difference between them is what creates the bid-offer difference in the fx prices. All 4 rates (USD loan, USD deposit, EUR loan, EUR deposit) are used in the calculation ...

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I just checked Google Finance and the EUR/USD = 1.1190.... for arguments sake lets say it goes up by 0.10 to 1.2190 the percentage change = 1.2190/1.1190-1 = +8.94% in terms of USD/EUR the beginning quote would be 1/1.1190 = 0.8937 but would be 1/1.2190 = 0.8203 after the EUR/USD went up by 0.10. Therefore the change in terms of USD/EUR = 0.8203/0.8937-1 = ...

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You wrote "doesnt that mean that 1 year from now, 1.1 NZD = 1.01 USD". This is true if the UIP (Uncovered Interest Parity) is true, or in other words if the forward rate is an unbiased predictor of the future exchange. However empirical research has cast doubts on this theoretical proposition. It seems, for reasons that are not entirely clear yet, that high ...

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If you would want to lock in a Forward USDNZD rate then both the 10% and 1% are taken into account like you suggested. But if you would enter the fx carry trade like you suggested without trying to lock in a forward rate. Then the spot rate 1 year from now is still a random variable from todays perspective. You might get lucky and the rate does not ...

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Not sure if I understand your question, but if you're looking to analyze the extent to which interest rates differentials drive currencies, you'd probably want to focus on forward interest rate swaps in order to capture market implied expectations. So 1y1y spreads could be meaningful for G10 currencies. You may also want to incorporate yield curve slopes ...

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