Cross Rate Calculation Bid Ask Spread

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Cross Rate & Bid-Ask Spread Calculator

Cross Rate & Bid-Ask Spread Calculator

Calculate the synthetic exchange rate (cross rate) between two currencies using their pairs with a common vehicle currency (usually USD), accounting for the bid-ask spread.

Divide (e.g., EUR/USD ÷ GBP/USD = EUR/GBP) Multiply (e.g., EUR/USD × USD/JPY = EUR/JPY)

Pair 1 (Base Pair)

e.g., EUR/USD (1.0850 / 1.0852)

Pair 2 (Counter Pair)

e.g., GBP/USD (1.2600 / 1.2604)

Calculated Cross Rate

Cross Bid: –
Cross Ask: –
Spread (Points): –
Spread Cost (%): –

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Understanding Cross Rates and Bid-Ask Spreads

In the foreign exchange (Forex) market, most major currencies are quoted against the US Dollar (USD). When you trade two currencies that do not involve the USD (for example, the Euro against the British Pound, or EUR/GBP), this is known as a Cross Rate.

Calculating the cross rate is not as simple as taking the mid-market rate. To get an accurate price that reflects the cost of trading, you must account for the Bid-Ask Spread of both underlying currency pairs. This calculator helps you determine the precise Bid and Ask price for a cross pair based on the quotes of the two vehicle pairs.

How the Calculation Works

The math behind cross rates depends on how the two pairs relate to the common currency (usually USD). There are two primary scenarios:

1. Division (Same Quote Currency)

This scenario occurs when both currencies are quoted against the USD as the "counter" currency (e.g., EUR/USD and GBP/USD). To find the cross rate of EUR/GBP, we divide the rates.

  • Cross Bid: You sell the Base currency (EUR) for USD (Bid rate), and then use that USD to buy the Counter currency (GBP) at the Ask rate.
    Formula: Bid(EUR/USD) ÷ Ask(GBP/USD)
  • Cross Ask: You buy the Base currency (EUR) with USD (Ask rate), having acquired USD by selling the Counter currency (GBP) at the Bid rate.
    Formula: Ask(EUR/USD) ÷ Bid(GBP/USD)

2. Multiplication (Chained Pairs)

This scenario occurs when the Quote currency of the first pair matches the Base currency of the second pair (e.g., EUR/USD and USD/JPY). To find EUR/JPY, we multiply the rates.

  • Cross Bid: You sell EUR for USD (Bid), then sell USD for JPY (Bid).
    Formula: Bid(EUR/USD) × Bid(USD/JPY)
  • Cross Ask: You buy EUR with USD (Ask), after buying USD with JPY (Ask).
    Formula: Ask(EUR/USD) × Ask(USD/JPY)

Why is the Cross Spread Wider?

You may notice that the spread (the difference between Bid and Ask) on a cross pair is usually wider than the spread on the major pairs (like EUR/USD). This is because the cross rate is synthetically created by executing two separate transactions. The transaction costs (spreads) of both "legs" of the trade are combined, resulting in a slightly more expensive spread for the cross rate.

Definition of Terms

  • Bid Price: The price at which the market is prepared to buy a currency from you (the price you sell at).
  • Ask Price: The price at which the market is prepared to sell a currency to you (the price you buy at).
  • Vehicle Currency: The common currency used to link two others, typically the US Dollar.

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