[Quantlib-users] Basic query on the riskfree rate in Garmankohlagen process

[Ashish B. <ash...@gm...>]

Hi,

I want to know which currency is to be considered domestic and which one
foreign for the risk-free rates in the following process while pricing the
FX option:
*process = ql.GarmanKohlagenProcess(initialValue, foreignRiskFreeTS,
domesticRiskFreeTS, volTS)*
source:
https://quantlib-python-docs.readthedocs.io/en/latest/stochastic_processes.html#garmankohlagenprocess

On the following page on Stack Overflow, the second parameter (USD) is
written with the name as domestic and the third parameter (EUR) as foreign
which is the inverse of the above user guide:

*ql.GarmanKohlagenProcess(ql.QuoteHandle(ql.SimpleQuote(1.122)),
usd_domestic, eur_foreign, volTS*
source:
https://stackoverflow.com/questions/66113871/pricing-an-fx-option-using-the-garman-kohlagen-process-in-quantlib-python

Could you please confirm if I have the FX rate as follows then what is the
correct convention:
For 1 EUR = 1.22 USD convention
conv-1: USD = foreign (2nd param) and EUR = domestic (3rd param)
or
conv-2:  EUR = foreign (2nd param) and USD = domestic (3rd param)

I suppose, when I put the FX rate in inverse convention, the risk-free
rates would also be switched.

Thanks in advance.

Regards,
Ashish