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Based on how foreign exchange markets are structured, you can, for example, convert from one currency to a second and then to a third currency. Triangulating back from the third to the first currency is arbitraged (that is, no profit or loss barring transaction cost).
For example, examine the 10 AM rates on 7/27/2007 sourced from the Federal Reserve Bank of New York, as shown in the following table.
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This Reverse FX Conversion process is triggered only if the Cross Calculation system variable is set to 'Y'. Clients typically load FX rates to one currency, but there might be scenarios where they have to convert the other way around.
For example, assume you use the Indirect method and load the following FX rates:
From currency: GBP
To currency: USD
Rate: 1.5
Now consider if you want to convert from USD to GBP using this rate:
Rate in calculation = 1/1.5
This scenario works if the FX is stored as a multiplier or divisor.
Stored as Multiplier:
1 GBP = 1.5 USD
To convert 100 GBP to USD = 100 * 1.5 = 150USD
To convert 100 USD to GBP = 100 * (1/1.5) = 66.66667 GBP
Stored as Divisor
1USD = 0.666667 GBP
To convert 100 GBP to USD = 100/0. 666667 = 150USD
To convert 100 USD to GBP = 100 * (1/0. 666667) = 66.66667 GBP
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PACE system id 137 must be to set to 'Y' to enable the cross currency calculation. The default is 'N'. If set to 'N', PACE assumes that all cross currency rates are loaded in the FX_RATES table.
You can store FX rates based on any currency you prefer. Most US clients store FX based on USD. However, clients in Europe might choose to store the FX rate using EUR or GBP as the reference currency. In this case, you must set up PACE system id 135 with the ISO code of the reference currency, as shown in the following figure.
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