Goodhart, Charles, Love, Ryan, Payne, Richard and Rime, Dagfinn (2002) Analysis of spreads in the dollar/euro and Deutsche Mark/dollar foreign exchange markets. Discussion paper, 467. Financial Markets Group, London School of Economics and Political Science, London, UK.
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This paper tries to provide a simple explanation for the empirical finding, documented here and also by Hau, Killeen and Moore (2002), that spreads in the spot USD/EUR market are substantially higher than those in the preceding DEM/USD foreign exchange market. The paper argues that it is primarily the re-factoring of the exchange rate, 1.75 DEM per USD compared to 1 USD per EUR together with the fact that dealers are faced with a minimum tick size, that has caused spreads to increase (as a percentage of mid-quote).
|Item Type:||Monograph (Discussion Paper)|
|Additional Information:||© 2002 The Authors|
|Library of Congress subject classification:||H Social Sciences > HG Finance
H Social Sciences > HB Economic Theory
|Sets:||Research centres and groups > Financial Markets Group (FMG)
Collections > Economists Online
Collections > LSE Financial Markets Group (FMG) Working Papers
|Date Deposited:||20 Aug 2009 16:43|
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