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Sunday, 8 April 2012

Direct Quote & Indirect Quote - Economics

An easy way to remember direct quote and indirect quote is remembering this notation

FC:DC = xxDC

This one is a direct quote for a domestic investor in foreign currency

For example
DC = AUD
FC = USD
USD:AUD = 1.003 AUD

This is a direct quote for an AUD investor in USD

DC:FC = xxFC

This one is an indirect quote for a domestic investor in foreign currency.

DC = AUD
FC = USD
AUD:USD = 0.997 USD

This one is an indirect quote for an Australian Investor in USD

Note: Direct & Indirect quotes are reciprocal of each other.
Direct = 1.003
Indirect = 1/1.003 = 0.997
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2 comments:

  1. Anonymous15 April 2012 at 15:15

    Can you check your first example. I would have said it is a direct quote for an Australian investor in USD. This is because it tells the Australian investor the cost of 1 unit of FC.

    Your second example looks right and if you apply it's logic to the first example you will see the error

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