FX Spot
The exchange rate for near-immediate delivery between two currencies.
Build the mental model first.
An FX rate is always one currency priced in another; the direction matters before any arithmetic begins.
The exchange rate for near-immediate delivery between two currencies.
Now make it exact.
Notation and units
Decimal rates and volatilities, year-fraction time and continuous compounding unless stated otherwise.
Every model has a price.
Educational conventions are stated explicitly and may simplify market quotation or settlement details.
Rates are continuously compounded unless the section says otherwise.
Inputs are deterministic in the base model.
“An unstated convention is a future reconciliation break.”— THEQUANTBATEMAN
Why a quant cares.
Anchor for forwards, swaps, options and cross-currency exposures.
The hedge has opinions.
Start with the quote convention, then ask which FX risk survives the hedge. A number without its convention is merely well-dressed ambiguity.
Ask Bateman about this model →