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Account Currency not equal to Base or Counter Currency


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Account Currency not equal to Base or Counter Currency

  #1 (permalink)
caliph
Berlin, Germany
 
Posts: 3 since Jan 2012
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I cannot find infos on the currency risk in the following situation:

Account currency:EUR
Spot Contract USD.CHF with 100.000 units

Where do I have a currency risk?

Obviously in the pair USD.CHF. No question about this.

But how about the currency risk between Base currency (here: USD) and account currency (here:EUR)?
Will it affect only the profit/loss value resulting from the position or the whole 100.000 units as as well?

best regards,
Stefan

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  #3 (permalink)
 
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 Fat Tails 
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If you have a long position USD.CHF you will make a profit, if USD moves up against CHF and a loss, if USD moves down against the CHF. This position is not related to the Euro except if you think that the CHF moves in lockstep with EUR.

The USD.CHF position is identical with the combination of

- a long position USD.EUR
- and a short position CHF.EUR

The Euro risk cancels out.

Where the Euro comes into play is, when you convert your gains or losses.

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  #4 (permalink)
caliph
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Thank you for your answer!

Just as I thought

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 Big Mike 
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caliph View Post
Thank you for your answer!

Just as I thought

Please remember to use the Thanks button.

Mike

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Last Updated on February 13, 2012


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