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Spread Components in the Hungarian Forint-Euro Market

Author

Listed:
  • Michael Frömmel
  • Frederick Van Gysegem

Abstract

We apply the spread decomposition model by Huang and Stoll (1997) to a new data set on the Hungarian forint/euro interbank market. In contrast to previous results, we cover a minor market over a long time span. We find a significant inventory effect, and we find that spread size significantly increases with trade size. Overall, this work confirms the predictions from various theoretical models on a small and less-liquid market. In comparison with other studies, the size of the market, institutional differences between markets, and specificities of the data set seem to play an important role.

Suggested Citation

  • Michael Frömmel & Frederick Van Gysegem, 2012. "Spread Components in the Hungarian Forint-Euro Market," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 48(3), pages 52-69, May.
    • Handle: RePEc:mes:emfitr:v:48:y:2012:i:3:p:52-69
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    Cited by:

    1. M. Fr Mmel & F Van Gysegem, 2014. "Bid-Ask Spread Components on the Foreign Exchange Market: Quantifying the Risk Component," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 14/878, Ghent University, Faculty of Economics and Business Administration.
    2. Katarzyna Bień-Barkowska, 2014. "Capturing Order Book Dynamics in the Interbank EUR/PLN Spot Market," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 50(1), pages 93-117, January.
    3. Dinçer Afat & Michael Frömmel, 2021. "A Panel Data Analysis of Uncovered Interest Parity and Time-Varying Risk Premium," Open Economies Review, Springer, vol. 32(3), pages 507-526, July.
    4. Carol Osler & Xuhang Wang, 2012. "The Microstructure of Currency Markets," Working Papers 49, Brandeis University, Department of Economics and International Business School.
    5. M. Fr Mmel & X. Han & F. Van Gysegem, 2013. "News, Liquidity Dynamics and Intraday Jumps: Evidence from the HUF/EUR market," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 13/848, Ghent University, Faculty of Economics and Business Administration.

    More about this item

    Keywords

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    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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