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Simple English definitions for legal terms
cross-rate
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A quick definition of cross-rate:
Cross-rate is a way to compare the value of two different currencies by using a third currency, usually the US dollar. It helps foreign exchange dealers to find opportunities to make a profit by buying and selling currencies in different markets. It's like comparing the prices of two different toys by using the price of a third toy as a reference.
A more thorough explanation:
Definition: Cross-rate refers to the exchange rate between two currencies expressed as the ratio of two foreign exchange rates in terms of a common third currency, usually the U.S. dollar. Foreign exchange rate dealers use cross-rate tables to look for arbitrage opportunities.
Example: Suppose the exchange rate between the U.S. dollar and the euro is 1:0.85, and the exchange rate between the U.S. dollar and the Japanese yen is 1:110. Then, the cross-rate between the euro and the yen would be 1:129.41 (110/0.85).
This means that one euro can be exchanged for 129.41 Japanese yen. Cross-rate is used to determine the value of one currency in terms of another currency, which is useful for international trade and investment.