Base currency and Digital twin: Difference between pages

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''Foreign exchange.''
''Information technology.''


A virtual representation that serves as the real-time digital counterpart of a physical object or process.


1. ''Rate quotation.''


The base currency in a foreign exchange rate quotation is the currency which there is one of.
:<span style="color:#4B0082">'''''Digital twins can help treasurers'''''</span>


:"The use and potential of digital twins is growing...


<span style="color:#4B0082">'''Example 1: Foreign exchange rate quotation'''</span>
:Being able to dynamically capture and process large amounts of data from multiple sources and using artificial intelligence techniques such as machine learning to exploit it, is taking digital twins into financial services.


In the quotation GBP/USD 1.3600; or 1 GBP = 1.3600 USD,
:Digital twins can, for example, help treasurers to improve cash and liquidity forecasting or reach business sustainability goals – and they will be building blocks in the metaverse."


the base currency is GBP;
:''Lesley Meall - freelance technology journalist - The Treasurer, Issue 4 2022 - December 2022, p36.''
 
meaning one British pound would be exchanged for a variable number of USD, depending on the rate quoted.
 
 
The base currency is also known as the Reference currency or the Fixed currency.
 
 
'''Base calculation rule'''
 
A rule of thumb in applying foreign exchange rates is to consider whether the calculation is from, or to, the base currency.
 
When calculating:
*From the base, multiply by the exchange rate
*To the base, divide by the exchange rate
 
 
<span style="color:#4B0082">'''Example 2: Calculating from the base currency'''</span>
 
We need to exchange between GBP 10m and USD.
 
Use the exchange rate GBP/USD 1.3600 to calculate the number of USD.
 
 
GBP is the base currency.
 
We're calculating '''''from''''' the base currency.
 
So <u>multiply</u> by the exchange rate:
 
USD amount = 10m x 1.3600
 
= '''USD 13.6m'''
 
 
<span style="color:#4B0082">'''Example 3: Calculating to the base currency'''</span>
 
We need to exchange between USD 10m and GBP.
 
Use the exchange rate GBP/USD 1.3600 to calculate the number of GBP.
 
 
GBP is the base currency.
 
We're calculating '''''to''''' the base currency.
 
So <u>divide</u> by the exchange rate:
 
GBP amount = 10m / 1.3600
 
= '''GBP 7.35m'''
 
 
 
 
2. ''Currency comparison.''
 
More generally, a 'base currency' means the currency with which other currencies are compared. 
 
 
<span style="color:#4B0082">'''Example 4: Multicurrency liquidity arrangement'''</span>
 
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. 
 
The base currency also serves as the basis for all interest rate calculations in the multicurrency liquidity arrangement.
 
 
<span style="color:#4B0082">'''Example 5: Foreign exchange gains and losses'''</span>
 
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.
 
In this context, FX movements arise when an organisation enters into a transaction in a foreign currency.
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.




== See also ==
== See also ==
* [[Accruals basis]]
* [[Artificial intelligence]]
* [[Foreign exchange]]
* [[Cash flow forecast]]
* [[Functional currency]]
* [[Digital]]
* [[Indirect quote]]
* [[Digital representation]]
* [[Realisation basis]]
* [[Digital technology]]
* [[Terms currency]]
* [[Digitalisation]]
* [[Variable currency]]
* [[Financial services]]
 
* [[Fintech]]
 
* [[Information technology]]
== Other resources ==
* [[Liquidity]]
[[Media:June_16_TT_Base_jumper.pdf| Base jumper - applying base currencies, direct and indirect exchange rates, The Treasurer]]
* [[Machine learning]]
* [[Metaverse]]
* [[Sustainability]]


[[Category:The_business_context]]
[[Category:Identify_and_assess_risks]]
[[Category:Manage_risks]]
[[Category:Manage_risks]]
[[Category:Trade_finance]]
[[Category:Risk_frameworks]]
[[Category:Risk_reporting]]
[[Category:Technology]]

Latest revision as of 13:06, 3 December 2022

Information technology.

A virtual representation that serves as the real-time digital counterpart of a physical object or process.


Digital twins can help treasurers
"The use and potential of digital twins is growing...
Being able to dynamically capture and process large amounts of data from multiple sources and using artificial intelligence techniques such as machine learning to exploit it, is taking digital twins into financial services.
Digital twins can, for example, help treasurers to improve cash and liquidity forecasting or reach business sustainability goals – and they will be building blocks in the metaverse."
Lesley Meall - freelance technology journalist - The Treasurer, Issue 4 2022 - December 2022, p36.


See also