Cross Rate
An exchange rate between two currencies derived via a third common currency.
A cross rate is calculated when there's no direct quote between two currencies. Instead, both currencies are quoted against a common base (usually USD), and the cross rate is derived by dividing one rate by the other. For example, EUR/GBP can be derived from EUR/USD and GBP/USD quotes.
Formula
Related Terms
Spot Rate
The current exchange rate for immediate delivery.
Base Currency
The reference currency in which portfolio values are expressed.
FX Risk
Risk from exchange rate fluctuations affecting foreign-denominated assets.
FX Hedging
Using forwards or options to eliminate or reduce currency risk.
Currency Exposure
The fraction of portfolio value exposed to a foreign currency.
Covered Interest Rate Parity (CIP)
Forward rate equals spot rate adjusted for interest rate differentials.