A study on foreign exchange dealers ' bid – ask spread quote behavior ☆
نویسندگان
چکیده
Article history: Received 12 January 2007 Accepted 9 November 2008 Available online 24 November 2008 Based on a questionnaire surveying dealers in the Taipei inter-bank foreign exchange market that was conducted in March 2001, I attempted to answer the question of who initiated the wider currency spread. It was found that the risk-averse dealers of small banks quoted wider spreads in order to conceal their inferior positions regarding information and inventory or to avoid market volatility risk. Some of the dealers of large multinational banks in major financial centers who normally quote conventional spreads were found to quote wider spreads in response to the request for quotations by small Taiwanese bank dealers who widened their spread quotes. © 2008 Elsevier B.V. All rights reserved. JEL classification: F31
منابع مشابه
Optimal Spread with Heterogeneous Expectations in Foreign Exchange Market
Our subject is foreign exchange auction through market makers. We consider market maker’s policy to choose bid and ask as an optimization problem. We show that if traders’ expectations are more heterogeneous, the market maker widens bid and ask spread. He can take advantage of the heterogeneous expectations. We derive an equation of expected transaction prices. This equation makes it possible t...
متن کاملIFE Working Paper 05 – 01 linear Dynamics in Nasdaq Dealer Quotes ”
This paper considers nonlinear dynamics of quotes issued by Nasdaq dealers. We study the top two ECN’s (Island and Instinet) and the three most active market makers for a sample of twenty stocks traded at Nasdaq. We develop a model that extends the standard linear vector error correction model for price discovery in three different ways. First, quote adjustments are set relative to the inside q...
متن کاملThe Use Of Financial Ratios as Measures Of Risk In The Determination Of The Bid- Ask Spread In Tehran Stock Exchange
متن کامل
Evaluation of the association between company performance and Iran’s stock market liquidity
This research studies the companies’ effectiveness and performance relationship with stock market liquidity in Tehran Stock Exchange during 2010-2015. Simultaneously, in the study, the three indicators: return on assets, return on investment and Tobin's Q ratio were applied as a measure of the performance and bid-ask spread as a measure of liquidity, bid-ask spread to the stock market. This res...
متن کاملAsymmetric responses of ask and bid quotes to information in the foreign exchange market
We study the price discovery in a foreign exchange electronic limit order market on a daily basis, by examining the informativeness of ask and bid quotes in the process of price formation. Using the data of prices and trades in the Euro–Dollar spot market via Electronic Broking Services (EBS), we find bid quotes provide more price discovery. This dominance of bid quotes in price discovery is st...
متن کامل