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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Description/Abstract
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.
| Item Type: | Article |
|---|---|
| ISSNs: | 0306-686X (print) |
| 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 |
| Item ID: | 51365 |
| Date Deposited: | 10 Jun 2008 |
| Last Modified: | 24 Jul 2012 11:22 |
| Contributors: | McGroarty, Frank (Author) ap Gwilym, Owain (Author) Thomas, Stephen H. (Author) |
| Date: | November 2007 |
| Status: | Published |
| Contact Email Address: | F.J.McGroarty@soton.ac.uk |
| URI: | http://eprints.soton.ac.uk/id/eprint/51365 |
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