Comments on: Cross Rate Transactions http://www.series34exam.com/cross-rate-transactions/ Sun, 05 Feb 2012 03:37:07 +0000 http://wordpress.org/?v=2.7.1 hourly 1 By: Big Piping http://www.series34exam.com/cross-rate-transactions/comment-page-1/#comment-3761 Big Piping Tue, 04 Jan 2011 23:25:57 +0000 http://www.series34exam.com/?p=136#comment-3761 the formatting did not turn out in my earlier post as it should have 2 columns under ENTRY EXIT, and four columns under Balance Sheet. the formatting did not turn out in my earlier post as it should have 2 columns under ENTRY EXIT, and four columns under Balance Sheet.

]]> By: Big Piping http://www.series34exam.com/cross-rate-transactions/comment-page-1/#comment-3760 Big Piping Tue, 04 Jan 2011 23:18:46 +0000 http://www.series34exam.com/?p=136#comment-3760 When you execute a spot forex transaction you are long/positive (+) one currency, and short/ Negative (-) the other. It may be helpful for you to think of this in terms of a balance sheet instead of a position in the market I will use the EUR/USD/PLN cross rate transaction/triangle example from above (3. Jantz Hoffman): ENTRY EXIT EUR/USD /1.2978 EUR/USD 1.2852/ EUR/PLN 3.2459/ EUR/PLN /3.2461 Market entry: USD amount divided by the ask price = EUR amount, and EUR amount multiplied by the bid Price = PLN amount. Market exit: PLN amount divided by the ask price = EUR amount, and EUR amount multiplied by the bid price = USD amount. To calculate the P&L subtract the second USD amount from the first as the question asks you to Sell USD/PLN Balance Sheet USD EUR PLN Entry -500,000.00 -385,065.61 0.00 Entry 0.00 +385,065.61 +1,250,539.39 Exit 0.00 +385,243.64 -1,250,539.39 Exit +495,115.13 -385,243.64 0.00 Sum Totals -4,884.87 0.00 0.00 Very tough question to answer in 1.5 minutes. When you execute a spot forex transaction you are long/positive (+) one currency, and short/ Negative (-) the other. It may be helpful for you to think of this in terms of a balance sheet instead of a position in the market I will use the EUR/USD/PLN cross rate transaction/triangle example from above (3. Jantz Hoffman):

ENTRY EXIT
EUR/USD /1.2978 EUR/USD 1.2852/
EUR/PLN 3.2459/ EUR/PLN /3.2461

Market entry:
USD amount divided by the ask price = EUR amount, and
EUR amount multiplied by the bid Price = PLN amount.
Market exit:
PLN amount divided by the ask price = EUR amount, and EUR amount multiplied by the bid price = USD amount.

To calculate the P&L subtract the second USD amount from the first as the question asks you to Sell USD/PLN

Balance Sheet
USD EUR PLN
Entry -500,000.00 -385,065.61 0.00
Entry 0.00 +385,065.61 +1,250,539.39
Exit 0.00 +385,243.64 -1,250,539.39
Exit +495,115.13 -385,243.64 0.00
Sum
Totals -4,884.87 0.00 0.00

Very tough question to answer in 1.5 minutes.

]]> By: Jantz Hoffman http://www.series34exam.com/cross-rate-transactions/comment-page-1/#comment-3319 Jantz Hoffman Thu, 28 Oct 2010 21:39:33 +0000 http://www.series34exam.com/?p=136#comment-3319 Sorry I did make that mistake. I did not mean to use the later dates rate...just and error on my part you should use the 3.2459 selling eur buing pln to get 1,250,539.37 PLN then at the later date you convert back to dollars by buying EUR/PLN and then selling EUR/USD... (1,250,539.37/3.2461=385,243 EUROS X 1.2852=495,115.122 USD) All told there would be a loss of 500000-495,114=$4,884.87. Sorry I did make that mistake. I did not mean to use the later dates rate…just and error on my part you should use the 3.2459 selling eur buing pln to get 1,250,539.37 PLN then at the later date you convert back to dollars by buying EUR/PLN and then selling EUR/USD… (1,250,539.37/3.2461=385,243 EUROS X 1.2852=495,115.122 USD) All told there would be a loss of 500000-495,114=$4,884.87.

]]> By: Michael http://www.series34exam.com/cross-rate-transactions/comment-page-1/#comment-3284 Michael Thu, 21 Oct 2010 18:57:34 +0000 http://www.series34exam.com/?p=136#comment-3284 I'm sorry the loss would be $6200... The loss on the EUR/PLN is only $100, for a total loss of $6200... I’m sorry the loss would be $6200…

The loss on the EUR/PLN is only $100, for a total loss of $6200…

]]> By: Michael http://www.series34exam.com/cross-rate-transactions/comment-page-1/#comment-3283 Michael Thu, 21 Oct 2010 18:53:29 +0000 http://www.series34exam.com/?p=136#comment-3283 I got a loss of $6300... You buy EUR/USD at 1.2978 on the offer and later sell on the bid of 1.2852 for a loss of 1260 (100,000 lot) *5 lots (for the 500,000) equals a loss of 6100. You sell EUR/PLN at the bid of 3.2459 and buy back at the offer 3.2461 a loss of $200... Total loss $6300... I got a loss of $6300…

You buy EUR/USD at 1.2978 on the offer and later sell on the bid of 1.2852 for a loss of 1260 (100,000 lot) *5 lots (for the 500,000) equals a loss of 6100.

You sell EUR/PLN at the bid of 3.2459 and buy back at the offer 3.2461 a loss of $200…

Total loss $6300…

]]> By: Seth http://www.series34exam.com/cross-rate-transactions/comment-page-1/#comment-3242 Seth Sun, 10 Oct 2010 16:31:25 +0000 http://www.series34exam.com/?p=136#comment-3242 Jantz, I believe you meant made an accidental mistake in your calculation. When converting from EUR to PLN you used the rate at the later date. Was this done on purpose? I found a loss of about 4884 USD. Is this correct? Jantz,

I believe you meant made an accidental mistake in your calculation. When converting from EUR to PLN you used the rate at the later date. Was this done on purpose? I found a loss of about 4884 USD.

Is this correct?

]]> By: Jantz Hoffman http://www.series34exam.com/cross-rate-transactions/comment-page-1/#comment-3235 Jantz Hoffman Thu, 07 Oct 2010 16:15:25 +0000 http://www.series34exam.com/?p=136#comment-3235 In this example we take the 500,000 USD, divdie by the EUR/USD (buying EUR/USD) offer rate 1.2978 to get the number of EUROS. 385,267.38. We then multiply the number of EUROS by the Bid of the EUR/PLN rate (selling EUR/PLN) 3.2444 to get 1,249,961.47 PLN. Now at at later date we calcualte the what those are worth in USD, so we divide by the EUR/PLN offer (buying EUR/PLN)3.2461to get 385,065.61 Euros. The next step is to convert back to USD so we multiply by the EUR/USD (selling EUR/USD)bid 1.2852 to get 494,886.32 or a loss of 5,113.68. Hope this helps. In this example we take the 500,000 USD, divdie by the EUR/USD (buying EUR/USD) offer rate 1.2978 to get the number of EUROS. 385,267.38. We then multiply the number of EUROS by the Bid of the EUR/PLN rate (selling EUR/PLN) 3.2444 to get 1,249,961.47 PLN. Now at at later date we calcualte the what those are worth in USD, so we divide by the EUR/PLN offer (buying EUR/PLN)3.2461to get 385,065.61 Euros. The next step is to convert back to USD so we multiply by the EUR/USD (selling EUR/USD)bid 1.2852 to get 494,886.32 or a loss of 5,113.68.

Hope this helps.

]]> By: Jantz Hoffman http://www.series34exam.com/cross-rate-transactions/comment-page-1/#comment-3234 Jantz Hoffman Thu, 07 Oct 2010 16:07:35 +0000 http://www.series34exam.com/?p=136#comment-3234 I had one of these on my exam. Questions was framed as such You have a customer who believes the polish zolty is going appreciate in value. The customer has 25,000 on depost and wants to trade $500,0000. Only the FDM does not offer a USD/PLN only a EUR/PLN. At the time that your customer wants to by the PLN, the rates are as follows. EUR/USD 1.2975/1.2978 EUR/PLN 3.2459/3.24675 Later when your customer closes the position, the rates are as follows. EUR/USD 1.2852/1.2855 EUR/PLN 3.2444/3.2461 From this you had to calculate the profit or loss I had one of these on my exam. Questions was framed as such

You have a customer who believes the polish zolty is going appreciate in value. The customer has 25,000 on depost and wants to trade $500,0000. Only the FDM does not offer a USD/PLN only a EUR/PLN. At the time that your customer wants to by the PLN, the rates are as follows.

EUR/USD 1.2975/1.2978
EUR/PLN 3.2459/3.24675

Later when your customer closes the position, the rates are as follows.

EUR/USD 1.2852/1.2855

EUR/PLN 3.2444/3.2461

From this you had to calculate the profit or loss

]]> By: admin http://www.series34exam.com/cross-rate-transactions/comment-page-1/#comment-3167 admin Tue, 14 Sep 2010 22:48:53 +0000 http://www.series34exam.com/?p=136#comment-3167 Hi David, We are actively revising the information here so it will be more useful for those taking the exam. Please look back soon. Regards, Bart Hi David,

We are actively revising the information here so it will be more useful for those taking the exam. Please look back soon.

Regards,
Bart

]]> By: David http://www.series34exam.com/cross-rate-transactions/comment-page-1/#comment-3095 David Thu, 19 Aug 2010 12:12:14 +0000 http://www.series34exam.com/?p=136#comment-3095 Huh??? Can someone explain the formula in a layman's terms, please? Huh???
Can someone explain the formula in a layman’s terms, please?

]]> By: Forex Trading Calculations http://www.series34exam.com/cross-rate-transactions/comment-page-1/#comment-191 Forex Trading Calculations Mon, 29 Jun 2009 22:27:57 +0000 http://www.series34exam.com/?p=136#comment-191 [...] Cross rate transactions [...] [...] Cross rate transactions [...]

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