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Sir I have one question in regards to risk management chapters.
You have explained so well in your lectures about the conversion rule (i.e. use lower rate if buying and higher if selling – first currency), and you also explained well how to find out the forward rate if premium is given (i.e. subtract from spot).
One of my friend have attempted the AFM Paper and he told me that the examiner sometimes gives the direct quotes instead of indirect.
Kindly can you explain a little bit the following.1
1. Difference between direct and indirect quote.
2. Whether the conversion rules apply the same in both?
3. Premium rule also remains the same?Direct and indirect quotes simply refer to which way round the quote is given e.g. whether it is Pounds to the dollar or dollars to the pounds.
I do at the beginning of the first lecture on exchange rate risk management do through examples both ways round. None of the other ‘rules’ change. But obviously do work through all the lecture examples and examples in your Revision Kit.
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