Inversion: Difference between revisions
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A term used in foreign exchange rate quotation. | A term used in foreign exchange rate quotation. | ||
Consider the historical FX quote | |||
'''Example''' | |||
Consider the historical FX quote: | |||
1 GBP = USD 1.4598 - 1.4602. | |||
The base currency is GBP. | 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): | |||
1 USD = GBP ( 1 / 1.4602 ) - ( 1 / 1.4598 ) | |||
1 USD = GBP 0.6848 - 0.6850. | 1 USD = GBP 0.6848 - 0.6850. | ||
Revision as of 15:41, 16 March 2015
1.
A term used in foreign exchange rate quotation.
Example
Consider the historical FX quote:
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):
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).
