Analysis of spreads in the dollar/euro and Deutsche Mark/dollar foreign exchange markets

Charles Goodhart, Ryan Love, Richard Payne () and Dagfinn Rime

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: This paper tries to provide a simple explanation for the empirical finding, documented here and also by Hau, Killeen and Moore (2002), that spreads in the spot USD/EUR market are substantially higher than those in the preceding DEM/USD foreign exchange market. The paper argues that it is primarily the re-factoring of the exchange rate, 1.75 DEM per USD compared to 1 USD per EUR together with the fact that dealers are faced with a minimum tick size, that has caused spreads to increase (as a percentage of mid-quote).

JEL-codes: F31 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2002-02-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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http://eprints.lse.ac.uk/24958/ Open access version. (application/pdf)

Related works:
Journal Article: Analysis of spreads in the dollar/euro and deutschemark/dollar foreign exchange markets (2002)
Working Paper: Analysis of spreads in the Dollar/Euro and Deutsche Mark/Dollar foreign exchange markets (2002)
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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:24958

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