Determining Fx Rates

Ethan Wong
Ethan Wong Explorer
in RFA

Some RICs do not seem to exist for some rates (if I am not mistaken) e.g.: TWDZMK

All these RICs are invalid: TWDZMK=, ZMKTWD=, TWDZMK=R, ZMKTWD=R so I guess we must triangulate this rate using USD but then if you got an update for only one of the currencies then you would need to recalculate the rate which could then be inaccurate

Is there a set way to calculate FX rates using Reuters or obtain every possible rate?

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  • Lars-at-Addicticks
    Lars-at-Addicticks Expert
    Answer ✓

    Read this answer starting from "The next thing to understand ...". This will explain why such crosses are not readily available: nobody actually trades them. You can hope that TR has created an artificial "=R" RIC for that pair, but from my experience TR hasn't done so for all possible combinations of all the world's currencies.

    Bottom line: If you have a really odd cross then you may have to do the calculation yourself.

    Correctly calculating a cross rate for curX/curY when you already have curZ/curX and curZ/curY seems straight-forward when you look at it first, but it really isn't if you want something fully correct as you'll have to take into account differences in holiday calendars and then you need to use FX Swap rates as well. You'll also need to take into account if any input rate use a different quotation unit than 1. This type of calculation is what the professionals do and people actually make money from trading odd pairs on retail platforms where they do this calculation incorrectly, i.e. exploiting the flaw in the oversimplified calculation.

    But if you just want an approximation, meaning don't care about date diffs and assuming quotation unit of both the underlying pairs is 1, then :

    rate for curX/curY = rate for curZ/curY divided by rate for curZ/curX

    For things like valuation of assets the approximate calculation is often good enough.

    I know this was possibly not the answer you were hoping for. Please don't kill the messenger. :-)

    Lars

    Addicticks

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