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Spread components in the Hungarian Forint-Euro market

Author
Organization
Project
BOF09/24J/144
Abstract
We apply the spread decomposition model by Huang and Stoll (1997) to a new data set on the Hungarian forint/euro interbank market. In contrast to previous results, we cover a minor market over a long time span. We find a significant inventory effect, and we find that spread size significantly increases with trade size. Overall, this work confirms the predictions from various theoretical models on a small and less-liquid market. In comparison with other studies, the size of the market, institutional differences between markets, and specificities of the data set seem to play an important role.
Keywords
PRICE, TRADE, VOLATILITY, INFORMATION, FOREIGN-EXCHANGE MARKET, BID-ASK SPREAD, LIQUIDITY, PROFITS, DEPTH, TESTS, adverse selection, foreign exchange, Hungary, inventory, microstructure, spread

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Citation

Please use this url to cite or link to this publication:

Chicago
Frömmel, Michael, and Frederick Van Gysegem. 2012. “Spread Components in the Hungarian Forint-Euro Market.” Emerging Markets Finance and Trade 48 (3): 52–69.
APA
Frömmel, M., & Van Gysegem, F. (2012). Spread components in the Hungarian Forint-Euro market. EMERGING MARKETS FINANCE AND TRADE, 48(3), 52–69.
Vancouver
1.
Frömmel M, Van Gysegem F. Spread components in the Hungarian Forint-Euro market. EMERGING MARKETS FINANCE AND TRADE. 2012;48(3):52–69.
MLA
Frömmel, Michael, and Frederick Van Gysegem. “Spread Components in the Hungarian Forint-Euro Market.” EMERGING MARKETS FINANCE AND TRADE 48.3 (2012): 52–69. Print.
@article{2974407,
  abstract     = {We apply the spread decomposition model by Huang and Stoll (1997) to a new data set on the Hungarian forint/euro interbank market. In contrast to previous results, we cover a minor market over a long time span. We find a significant inventory effect, and we find that spread size significantly increases with trade size. Overall, this work confirms the predictions from various theoretical models on a small and less-liquid market. In comparison with other studies, the size of the market, institutional differences between markets, and specificities of the data set seem to play an important role.},
  author       = {Frömmel, Michael and Van Gysegem, Frederick},
  issn         = {1540-496X},
  journal      = {EMERGING MARKETS FINANCE AND TRADE},
  keywords     = {PRICE,TRADE,VOLATILITY,INFORMATION,FOREIGN-EXCHANGE MARKET,BID-ASK SPREAD,LIQUIDITY,PROFITS,DEPTH,TESTS,adverse selection,foreign exchange,Hungary,inventory,microstructure,spread},
  language     = {eng},
  number       = {3},
  pages        = {52--69},
  title        = {Spread components in the Hungarian Forint-Euro market},
  url          = {http://dx.doi.org/10.2753/REE1540-496X480303},
  volume       = {48},
  year         = {2012},
}

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