Inversion: Difference between revisions
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imported>Doug Williamson m (Spacing 22/8/13) |
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1. | 1. | ||
A term used in foreign exchange rate quotation. | A term used in foreign exchange rate quotation. | ||
Consider the historical FX quote of 1 GBP = USD 1.4598 - 1.4602. | Consider the historical FX quote of 1 GBP = USD 1.4598 - 1.4602. | ||
The base currency is GBP. | The base currency is GBP. | ||
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1 USD = GBP 0.6848 - 0.6850. | 1 USD = GBP 0.6848 - 0.6850. | ||
2. | 2. | ||
In any market, the reversal of a normal - or commonly expected - relationship. | In any market, the reversal of a normal - or commonly expected - relationship. | ||
For example the situation of an Inverse yield curve, where longer maturities of funds are trading at LOWER yields than shorter-dated maturities (being the opposite of the normally expected upward-sloping relationship). | For example the situation of an Inverse yield curve, where longer maturities of funds are trading at LOWER yields than shorter-dated maturities (being the opposite of the normally expected upward-sloping relationship). | ||
== See also == | == See also == | ||
Revision as of 14:12, 22 August 2013
1.
A term used in foreign exchange rate quotation.
Consider the historical FX quote of 1 GBP = USD 1.4598 - 1.4602.
The base currency is GBP.
The inversion of this FX quote means expressing the same price, but with the other currency as the base currency (USD here).
So 1 USD = GBP [1/1.4602] - [1/1.4598]
1 USD = GBP 0.6848 - 0.6850.
2.
In any market, the reversal of a normal - or commonly expected - relationship.
For example the situation of an Inverse yield curve, where longer maturities of funds are trading at LOWER yields than shorter-dated maturities (being the opposite of the normally expected upward-sloping relationship).
