Goodhart, Charles, Love, Ryan, Payne, Richard and Rime, Dagfinn (2002) Analysis of spreads in the dollar/euro and Deutsche Mark/dollar foreign exchange markets. Financial Markets Group Discussion Papers (467). Financial Markets Group, The London School of Economics and Political Science, London, UK.
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Abstract
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) |
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| Official URL: | http://fmg.ac.uk |
| Additional Information: | © 2002 The Authors |
| Divisions: | Financial Markets Group |
| Subjects: | H Social Sciences > HG Finance H Social Sciences > HB Economic Theory |
| JEL classification: | F - International Economics > F3 - International Finance > F31 - Foreign Exchange |
| Date Deposited: | 20 Aug 2009 16:43 |
| Last Modified: | 13 Sep 2024 19:47 |
| URI: | http://eprints.lse.ac.uk/id/eprint/24958 |
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