The components of electronic inter-dealer spot FX bid-ask spreads
McGroarty, Frank, ap Gwilym, Owain and Thomas, Stephen H. (2007) The components of electronic inter-dealer spot FX bid-ask spreads. Journal of Business Finance & Accounting, 34, (9-10), 1635-1650. (doi:10.1111/j.1468-5957.2007.02051.x).
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This paper applies an established bid-ask spread decomposition model to the inter-dealer spot foreign exchange market. In addition, the paper presents and tests a modified decomposition model which is specifically adapted to the features of order-driven markets and which is found to produce more plausible results than the original model. Price clustering is introduced as a new explanatory factor within this framework and is shown to be vitally important in understanding the composition of bid-ask spreads in this market.
|Keywords:||high frequency data, foreign exchange, market microstructure, bid-ask spreads, order driven|
|Subjects:||H Social Sciences > HG Finance|
|Divisions:||University Structure - Pre August 2011 > School of Management
|Date Deposited:||10 Jun 2008|
|Last Modified:||24 Jul 2012 11:22|
|Contact Email Address:||F.J.McGroarty@soton.ac.uk|
|RDF:||RDF+N-Triples, RDF+N3, RDF+XML, Browse.|
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