Inversion: Difference between revisions
From ACT Wiki
Jump to navigationJump to search
imported>Doug Williamson m (Spacing 22/8/13) |
imported>Doug Williamson m (Category added 9/10/13) |
||
| Line 26: | Line 26: | ||
* [[Inverse quote]] | * [[Inverse quote]] | ||
* [[Inverse yield curve]] | * [[Inverse yield curve]] | ||
[[Category:Manage_risks]] | |||
Revision as of 13:44, 9 October 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).
