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The components of electronic order-driven spot FX bid-ask spreads pre- and post-EMU

The components of electronic order-driven spot FX bid-ask spreads pre- and post-EMU
The components of electronic order-driven spot FX bid-ask spreads pre- and post-EMU
This paper applies an established bid-ask spread decomposition model to spot foreign exchange market in order to assess the impact of European Monetary Union (EMU). Additionally, the paper presents and tests a modified decomposition model which is specifically adapted to the features of order-driven markets. The latter model provides much improved performance. Price clustering is introduced as a new explanatory factor within this framework and is shown to be vitally important in understanding the bid-ask spread and price determination.
high frequency data, foreign exchange, market microstructure, bid-ask spreads, orderdriven
University of Southampton
McGroarty, F.
693a5396-8e01-4d68-8973-d74184c03072
Ap Gwiylm, O.
9b904bb3-d557-4d37-94b6-bcd0bb1faea3
Thomas, S.H.
51ff3b62-89ae-4190-8a9e-ed4a76c8297c
McGroarty, F.
693a5396-8e01-4d68-8973-d74184c03072
Ap Gwiylm, O.
9b904bb3-d557-4d37-94b6-bcd0bb1faea3
Thomas, S.H.
51ff3b62-89ae-4190-8a9e-ed4a76c8297c

McGroarty, F., Ap Gwiylm, O. and Thomas, S.H. (1970) The components of electronic order-driven spot FX bid-ask spreads pre- and post-EMU Southampton, UK. University of Southampton 26pp.

Record type: Monograph (Discussion Paper)

Abstract

This paper applies an established bid-ask spread decomposition model to spot foreign exchange market in order to assess the impact of European Monetary Union (EMU). Additionally, the paper presents and tests a modified decomposition model which is specifically adapted to the features of order-driven markets. The latter model provides much improved performance. Price clustering is introduced as a new explanatory factor within this framework and is shown to be vitally important in understanding the bid-ask spread and price determination.

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More information

Published date: 1 January 1970
Keywords: high frequency data, foreign exchange, market microstructure, bid-ask spreads, orderdriven

Identifiers

Local EPrints ID: 39882
URI: http://eprints.soton.ac.uk/id/eprint/39882
PURE UUID: 8c5e625c-18bf-49cc-89c7-94b5c7ce7319
ORCID for F. McGroarty: ORCID iD orcid.org/0000-0003-2962-0927

Catalogue record

Date deposited: 28 Aug 2008
Last modified: 06 Jun 2018 12:46

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