International Finance: Putting Theory Into Practice

3.3. THE LAW OF ONE PRICE FOR SPOT EXCHANGE QUOTES 99

Figure 3.12:

A Dealer’s Shopping-Around Spreadsheet

Key

Courtesy of Paul Goossens, dealer at

KBC

Brussels. Paul’s spreadsheet shows the best quotes from

EBS

’s broking screens, from Reuters Dealing

2002, and the indirect quotes (via

usd

or

eur

). The latter are obviously rounded. Check how the indirect quotes are always wider at one side at least.

(With only two pips between the best direct quotes, and with rounding of the synthetic quotes, one side must always seem to match.) The wider quoteslabeled Reuters are the indicative, non-binding ones from the

Reuters FX/FX

pages; they mean nothing except that that some banks are willing to quote.

See how Paul’s sheet gets the

eur

/usd

quote from

EBS

into the black&green part of the spreadsheet. Cell 1 is selected; spot the underlying command

=RtGet(‘‘IDN’’:‘‘EUR=EBS’’:‘‘BID’’)

in the

enter function

box above the spreadsheet. From the imported data in the black part, synthetic rates

are computed.