About Cross Rates

Since Aptify provides the capability to store currency spot rates, a key factor is determining which spot rate records should be included in the system. For every currency type that is tracked, the number of rates increases exponentially. For example, an organization tracks US dollars, Canadian dollars, euros, and Japanese yen. These four currencies could generate 12 possible combinations of spot rates (cross rates).

• Canadian dollars per 1 US dollar
• Euros per 1 US dollar
• Japanese yen per 1 US dollar
• US dollars per 1 Canadian dollar
• Euros per 1 Canadian dollar
• Japanese yen per 1 Canadian dollar
• US dollars per 1 euro
• Canadian dollars per 1 euro
• Japanese yen per 1 euro
• US dollars per 1 Japanese yen
• Canadian dollars per 1 Japanese yen
• Euros per 1 Japanese yen

The formula to determine the number of possible cross rates for a specified number of currencies is:

Total Number of Cross Rates = x² - x
(where x = the total number of currencies being tracked).

Aptify provides functionality that makes it unnecessary to manually create all of the possible cross rates in the Currency Spot Rates service. When a specific combination is required, Aptify creates a new record in the Currency Spot Rates service for the derived combination (to four decimal places). Derived combinations are required when cross rates exist for Currency A to the Base Currency X, and for Currency B to the Base Currency X, but a ratio is needed for Currency A to Currency B, or Currency B to Currency A.

For example, assume the organization only chooses to manually create or import spot rates with a base currency of US dollars. If the currency spot rate for Japanese yen is 120 and the currency spot rate for Canadian dollars is 1.55, the spot rate between yen and Canadian dollars can be derived to be approximately 77.4 (1 Canadian dollar is equal to 77.4 Japanese yen). Aptify creates a Currency Spot Rates record for the derived spot rate when a transaction involves only Canadian dollars and Japanese yen. The derived ratio is then used for the transaction and stored as the spot rate for that transaction.

Once a derived spot rate record is created, that record is used in subsequent transactions until a new derived spot rate record is created. The system creates a new derived spot rate when there are newer records for the currencies making up the spot rate. In addition, the date and time for the new records must be equal or fall within a certain time frame as defined in the Quotation Tolerance Interval entity attribute in the Currency Spot Rates entity. The quotation tolerance interval determines the amount of time two currency spot rates can differ in the date field and still be used to create a derived spot rate record. For more information, see About the Quotation Tolerance Interval.

For example, on January 1st, the following records exist in the Currency Spot Rates service.

A foreign currency order is taken and the order is marked as shipped, triggering the Mark-To-Market object to run in the background and create a derived spot rate between Japanese yen and Canadian dollars. The following Currency Spot Rates record is automatically created.

On January 15th, the Currency Spot Rates service is updated and new records for Yen/U.S. dollar and Canadian dollar/U.S. dollar are created.

On January 16th, payment is received which requires the use of a Yen/Canadian dollar spot rate. The January 1 Currency Spot Rates record with a derived rate of 77.4194 exists, but since there are two more current records for the currencies that make up the derived spot rate, a new derived spot rate record is automatically created upon saving the payment. The date on the new derived spot rate record is the same as the date on the records from which it was derived, not the date on which it was created.