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136 CH AP T E R 6 ■ L E A R N IN G T HE B AS IC S O F OB J E CT OR I E N T E D P R O G R AM M IN G
Understanding Currency Spreads
This chapter’s sample application deals with exchanging different currencies。 Did you know
that when you exchange one currency for another； you never need to pay a processing fee？
Whether you are exchanging currencies at some airport or on an exchange； you should not be
charged any processing fees。 It makes you wonder how people earn money by accepting one
currency and then giving out another currency。 The answer lies in how currency exchange works。
When dealing with currencies； you are always dealing with currency pairs。 This is different
from something like buying a stock； when you are dealing with only that stock。 A currency by
itself is actually quite useless。 Suppose you have a 100 in your hand。 What will it be worth one
year from now？ The answer is simple： 100。 Yes； you can argue that the 100 will not buy as
much next year； but that would be plicating the issue with concerns not related to this
discussion。 The fact is that if you have 100 dollars； 100 yen； 100 euros； and so on into infinite
time； you will always have 100 currency units。
Currency exchange involves paring one currency to another currency。 The value of a
currency is what one person would give in parison to another currency。
Foreign exchange （forex） market traders make their money by dealing in spreads。 Spreads
are tricky because； as the exchange rate moves up or down； so does the spread。 For example；
hotels always give you horrible rates； and you may wonder why they are ripping you off。 But
hotels are not ripping you off； they are hedging themselves on the safe side。
Consider the following example of a spread：
EUR。USD 1。4686 1。4687
The EUR。USD term means you are converting one euro （EUR） into a number of US dollars
（USD）。 The first number is the bid； which means that a trader is willing to give 1。4686 US dollars
for every euro。 The second number is saying a trader wants 1。4687 US dollars for every euro。
Essentially； the buyer and seller are 0。0001 US dollars apart。 The exchange spread is normal；
and it moves around because some might be willing to sell at a lower conversion rate； and others
might be willing to buy at a higher conversion rate。
Let’s say one day you enter a hotel in Austria on a skiing holiday。 In your hand； you have
1；000 US dollars； but Austria belongs to the European Union （EU）。 To buy anything in the EU
zone； you need euros。 Being clever； you decide to go on the Internet and check out the going
spread。 It turns out to be the one you’ve just seen。
Standing in the hotel foyer； you have US dollars in your pocket and you need to buy euros。
Thus； you will need to go in the direction USD。EUR。 The way to do that is to divide one by the
posted spread values。 This calculation gives the following conversion rates：
USD。EUR 0。6809 0。6808
The numbers are a bit wrong； because the buyer is willing to give a higher value than the
seller。 Granted； this happens at times on the forex markets； but here； it’s because we used a raw
conversion of EUR。USD。 The market might be a bit higher and lower； but generally speaking；
you have a feeling of what to expect。
You advance to the hotel desk； and you kindly ask what the going rate is for US dollars to
euros。 The concierge gives the following exchange rate：
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CH A PT E R 6 ■ L E A R N I N G T HE B AS IC S O F O B J E CT OR I E N TE D P R O G R AM M IN G 137
USD。EUR 0。65120
EUR。USD 1。5010
Doing your calculations； this rate doesn’t seem right。 The hotel is giving you 651。20 euros
for your 1；000 US dollars； but the forex market clearly says the traders would be willing to give
you 680。91 euros。 The hotel appears to be ripping you off by approximately 29 euros。 But the
hotel is not ripping you off； rather； it is hedging its risks。 The spot conversion rates will go up
and down during the day； and the hotel is not in the business of exchanging money。 The hotel
is in the business of giving you room and board。 The hotel managers need to make sure that
when they go to the bank to exchange your dollars for euros； they don’t lose money in the
process。 They ensure this by giving you less money。
Whenever you exchange monies； you should always look at the spreads。 Sometimes the
spreads are good； sometimes they are horrible。 I have found the best spreads are at the banks。
It is a bit more work to get money from your home bank； but usually worth the effort。 Another
option is to pull the money from your credit card； however； sometimes credit cards charge
interest on the money you withdrew。
Now that you have an idea of what’s involved in currency exchange； let’s see what our
sample application will do。
Organizing the Currency Exchange Application
The currency application takes a number of currency units and converts it to a number of other
currency units。 The application will implement the following features：
o Accept and store a currency exchange rate
o Store the currency unit identifiers
o Convert to a currency and back to the original currency
o Distinguish between active currency traders and hotel currency traders
o Implement a spread for hotel currency traders
As in the examples in the previous chapters； the project structure of the currency applica
tion will consist of two projects： a console testing application； named TestCurrencyTrader； and
a library ponent； named CurrencyTrader； which contains the functionality of the hotel
trader and the active trader。
Writing Tests for the
Currency Exchange Application
Since we don’t know exactly how the implementation will appear； let’s start by writing some
tests that will use our implementation。 We want to build the application incrementally； so we’ll
write some tests； write some code； test the code； and continue。 The overall big picture is to be
able to convert from one currency to another。
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138 CH AP T E R 6 ■ L E A R N IN G T HE B AS IC S O F OB J E CT OR I E N T E D P R O G R AM M IN G
Getting Started with Structural Code
At the heart of the application are an exchange rate； currency units； and a calculation that
bines the exchange rate with the currency units。 Thus； a logical first step would be to write
test code that bines these elements； something like this：
Dim cls As CurrencyTrader = New CurrencyTrader（）
cls。ExchangeRate = 1。46
Dim haveUSD As Double = 100。0
Dim getEUR As Double = cls。Convert（haveUSD）
Console。WriteLine（〃Converted 〃 & haveUSD & 〃 USD to 〃 & getEUR）
This code is unique in that the test code has all of the responsibility of making sure the
correct data is assigned to the structure。 To clarify this； here is the same code with random vari
able n