Analysis of spreads in the Dollar/Euro and Deutsche Mark/Dollar foreign exchange markets
AbstractThis 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).
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Bibliographic InfoPaper provided by Financial Markets Group in its series FMG Discussion Papers with number dp467.
Date of creation: Feb 2002
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- Charles Goodhart & Ryan Love & Richard Payne & Dagfinn Rime, 2002. "Analysis of spreads in the dollar/euro and deutschemark/dollar foreign exchange markets," Economic Policy, CEPR & CES & MSH, vol. 17(35), pages 535-552, October.
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