The forex fixing reform and its impact on cost and risk of forex trading banks

Masahiro Yamada and Takatoshi Ito (itointokyo@gmail.com)

Finance Research Letters, 2017, vol. 21, issue C, 157-162

Abstract: This paper quantitatively evaluates the cost and risk of banks trading at the Forex London fixing, and examines the impact of the reform of February 2015. Based on the model calibration, we find that (1) the widening of the fixing time window, a main reform agenda, did not reduce the cost for banks but increased the risk of using pre-hedge; (2) the path of the actual trading volume pattern after the reform is consistent with theoretical predictions in a case of not being able to influence the fixing price.

Keywords: Foreign exchange markets; Fixing (search for similar items in EconPapers)
JEL-codes: D43 D47 F30 F31 F33 G12 G15 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:21:y:2017:i:c:p:157-162

DOI: 10.1016/j.frl.2016.12.004

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