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The components of electronic inter-dealer spot FX bid-ask spreads

Record type: Article

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.

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Citation

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 and Accounting, 34, (9-10), pp. 1635-1650. (doi:10.1111/j.1468-5957.2007.02051.x).

More information

e-pub ahead of print date: 2 July 2007
Published date: November 2007
Keywords: high frequency data, foreign exchange, market microstructure, bid-ask spreads, order driven

Identifiers

Local EPrints ID: 51365
URI: http://eprints.soton.ac.uk/id/eprint/51365
ISSN: 0306-686X
PURE UUID: ec6099b8-3972-453f-a391-f845e2b11005

Catalogue record

Date deposited: 10 Jun 2008
Last modified: 17 Jul 2017 14:48

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Contributors

Author: Frank McGroarty
Author: Owain ap Gwilym
Author: Stephen H. Thomas

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