2
$\begingroup$

I want to generate price of a synthetic currency pair. For example, I have EURGBP, GBPUSD prices and I want to generate EURUSD price. I preferred to use these already existing currency pairs to verify the calculation.

EURUSD(ask) = EURGBP(ask) * GBPUSD(ask)

EURUSD(bid) = EURGBP(bid) * GBPUSD(bid)

Is this correct?

Thanks in advence

$\endgroup$
1
$\begingroup$

You can see how to calculate cross currency rates at FX and MM training

disclaimer I authored the page

$\endgroup$
  • 1
    $\begingroup$ Very nice explanations on that page there Rupert. $\endgroup$ – not2qubit Dec 27 '19 at 15:22
1
$\begingroup$

Yes, that's correct:

Formula 5.2

(FCa / FCb)ask = (FCa / DC)ask ×(DC/FCb)ask

(FCa / FCb)bid = (FCa / DC)bid ×(DC/FCb)bid

Where FCa and FCb are the two foreign currencies and DC is the domestic currency.

source: https://www.investopedia.com/exam-guide/cfa-level-1/global-economic-analysis/spot-market.asp

$\endgroup$

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.