Asymmetric Information and the Forex Spreads of Custody Banks

Fund’s trade volume with custody bank. (Log) Market liquidity: Currency‘s share of world trading (BIS 2007). + Day-of-week dummies ? (Log) Trade amount: USD …

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Asymmetric Information and the Forex Spreads of Custody Banks
Custody Banks: Headache Relief, FX Trades with Custodians, Asymmetric Information, Asymmetric Info. and Custody Margins
Ambiguity Maintenance
Asset manager can be confident price is unreasonable if pays more than Day\’s High(1 + x%)
Maximum bid-ask spread paid by asset managers MaxSpread = Avg Log(High/Low) + 2x% Maximum custody-bank spread is thus Avg Log(High/Low) + 2x% – Interbank Spread – Sub-Custodian Margin (if any)

Download Asymmetric Information and the Forex Spreads of Custody Banks pdf from www.newyorkfed.org, 33 pages, 469.38KB.
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