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Definition of Cross rates

Cross Rates Image 1

Cross rates

The exchange rate between two currencies expressed as the ratio of two foreign exchange rates
that are both expressed in terms of a third currency.



Related Terms:

Average (across-day) measures

An estimation of price that uses the average or representative price of a
large number of trades.


Cross-border risk

Refers to the volatility of returns on international investments caused by events associated
with a particular country as opposed to events associated solely with a particular economic or financial agent.


Cross default

A provision under which default on one debt obligation triggers default on another debt
obligation.


Cross hedging

The practice of hedging with a futures contract that is different from the underlying being
hedged.


Cross holdings

One corporation holds shares in another firm.



Cross-sectional approach

A statistical methodology applied to a set of firms at a particular point in time.


Crossover rate

The return at which two alternative projects have the same net present value.


Cross Rates Image 2

expectations theory of exchange rates

Theory that expected spot exchange rate equals the forward rate.


Growth rates

Compound annual growth rate for the number of full fiscal years shown. If there is a negative
or zero value for the first or last year, the growth is NM (not meaningful).


Multiple rates of return

More than one rate of return from the same project that make the net present value
of the project equal to zero. This situation arises when the IRR method is used for a project in which negative
cash flows follow positive cash flows. For each sign change in the cash flows, there is a rate of return.


Preferred Rates

As non-smoking rates caused a major reduction in the cost of life insurance in the early 1980's, the emergence of preferred non-smoker rates in 1998 has caused another noteworthy reduction in rates. A growing number of insurance companies are offering better rates which go beyond simply looking at gender or smoking habits. Other health related factors such as physical build, lifestyle, avocation and personal and family health history indicating longer life expectancy can add up to significant cost savings to new life insurance applicants. Make certain to ask about these new preferred rates.


Real exchange rates

Exchange rates that have been adjusted for the inflation differential between two countries.


Spot exchange rates

Exchange rate on currency for immediate delivery. Related: forward exchange rate.


Term Structure of Interest Rates

Relationship among interest rates on bonds with different terms to maturity.


Interest Rate Parity

Theory that real interest rates are approximately the same across countries except for a risk premium.


purchasing power parity (PPP)

Theory that the cost of living in different countries is equal, and exchange rates adjust to offset inflation differentials across countries.


Cross Rates Image 3

Zero curve, zero-coupon yield curve

A yield curve for zero-coupon bonds;
zero rates versus maturity dates. Since the maturity and duration (Macaulay
duration) are identical for zeros, the zero curve is a pure depiction of supply/
demand conditions for loanable funds across a continuum of durations and
maturities. Also known as spot curve or spot yield curve.



 

 

 

 

 

 

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