Determinants of Bid-Ask Spread in Commercial Banks

Student: Oshchepkova Anastasiia

Faculty: Faculty of Economics, Management, and Business Informatics

Educational Programme: Economics (Bachelor)

Final Grade: 9

Year of Graduation: 2018

In this paper we investigate factors influencing the bid-ask spread. Nowadays there are 355 commercial banks in Russian Federation, which provide services for foreign exchange transaction. The question of when and where people can change money more profitable concerns time and again, therefore the company «RBC» has requested a study from a professional analytical agency. Nevertheless, not only consumers have to understand the bid-ask spread, but also commercial banks, who wants to reduce risks. However, what is determine the bid-ask spread? Which factors affect it? In this paper, we build a regression model based on the data of currency spread from 01.09.2017 to 28.02.2018. The results show that liquidity and previous spread influencing the bid-ask spread of U.S. dollar and euro. Assets and short-run volatility are significant only for U.S. dollar model, size order – only for euro.

Full text (added May 18, 2018)

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