imported>Doug Williamson |
imported>Doug Williamson |
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| '''1.'''
| | A period before a company announcement during which directors and senior employees are not allowed to trade shares in their company.<br /> |
| | | This ban is because of the high probability that such individuals will have inside knowledge of news that will have an effect on the share price. |
| The 'base currency' in a foreign exchange rate quotation is the currency which there is one of.
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| '''Example 1: Foreign exchange rate quotation'''
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| In the quotation GBP/USD 1.4600; or 1 GBP = 1.4600 USD,
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| the base currency is GBP;
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| meaning one British pound would be exchanged for a variable number of USD, depending on the rate quoted.
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| The base currency is also known as the Reference currency or the Fixed currency.
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| ===Base calculation rule===
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| A rule of thumb in applying foreign exchange rates is to consider whether the calculation is from, or to, the base currency.
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| When calculating:
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| *From the base, multiply by the exchange rate
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| *To the base, divide by the exchange rate
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| '''Example 2: Calculating from the base currency'''
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| We need to exchange between GBP 10m and USD.
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| Use the exchange rate GBP/USD 1.4600 to calculate the number of USD.
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| GBP is the base currency.
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| We're calculating '''''from''''' the base currency.
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| So <u>multiply</u> by the exchange rate:
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| USD amount = 10m x 1.4600
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| = '''USD 14.6m'''
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| '''Example 3: Calculating to the base currency'''
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| We need to exchange between USD 10m and GBP.
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| Use the exchange rate GBP/USD 1.4600 to calculate the number of GBP.
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| GBP is the base currency.
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| We're calculating '''''to''''' the base currency.
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| So <u>divide</u> by the exchange rate:
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| GBP amount = 10m / 1.4600
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| = '''GBP 6.85m'''
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| '''2.'''
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| More generally, a 'base currency' means the currency with which other currencies are compared.
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| '''Example 4: Multicurrency liquidity arrangement'''
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| In a multicurrency liquidity arrangement, 'base currency' refers to the currency in which the master account is denominated and to which all other currencies are converted.
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| The base currency also serves as the basis for all interest rate calculations in the multicurrency liquidity arrangement.
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| '''Example 5: Foreign exchange gains and losses'''
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| In calculating a foreign exchange gain or loss, a 'base' currency means the currency which is not considered to be 'foreign' currency for the purpose of calculating foreign exchange (FX) movements.
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| In this context, FX movements arise when an organisation enters into a transaction in a foreign currency.
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| Gains and losses are recognised, either on an [[accruals basis]] or a [[realisation]] basis, between the value of the transaction in the ‘home’ (or base) currency at two different points in time.
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| == See also == | | == See also == |
| * [[Functional currency]] | | *[[Efficient market hypothesis]] |
| * [[Indirect quote]] | | *[[Insider dealing]] |
| * [[Terms currency]]
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| * [[Variable currency]]
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| == Other resources ==
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| [[Media:June_16_TT_Base_jumper.pdf| Base jumper - applying base currencies, direct and indirect exchange rates, The Treasurer]]
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| | [[Category:Accounting,_tax_and_regulation]] |
| | [[Category:The_business_context]] |
| | [[Category:Corporate_finance]] |
| | [[Category:Investment]] |
| | [[Category:Long_term_funding]] |
| | [[Category:Compliance_and_audit]] |
| | [[Category:Ethics]] |
| | [[Category:Identify_and_assess_risks]] |
| [[Category:Manage_risks]] | | [[Category:Manage_risks]] |
| [[Category:Trade_finance]] | | [[Category:Risk_frameworks]] |
| | [[Category:Risk_reporting]] |
| | [[Category:Financial_products_and_markets]] |