Analysis of spreads in the dollar/euro and Deutsche Mark/dollar foreign exchange markets
Goodhart, C., Love, R., Payne, R. & Rime, D.
(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.
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 | Working paper |
|---|---|
| Copyright holders | © 2002 The Authors |
| Departments | LSE > Research Centres > Financial Markets Group |
| Date Deposited | 20 Aug 2009 |
| URI | https://researchonline.lse.ac.uk/id/eprint/24958 |