Inversion: Difference between revisions

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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).


See also