Working through some archives, came across some old recordings that I never got a chance to sift through. Below are the GBP/MXN, JPY/MXN, and GBP/JPY exchange rates recorded from the currency open on Sunday, October 2, 2011 through October 3, 2011. Following the outright prices below are the spreads constructed from finding the synthetic exchange rates via triangular arbitrage and spreading them to their live equivalents.
Because of the ease of this arbitrage and the automated nature of these trades, this relationship is a popular topic on this blog. The market opening and subsequent introduction of liquidity into the interbank market has been particularly interesting to study.
The Outrights.
These are the aforementioned spreads between the synthetic and live exchange rates. Despite the volatility of the underlying rates, the spreads unsurprisingly remain remarkably consistent. More detail on this type of trade can be found in the links below.
The Spreads.
Previous studies have touched on the following relationships:
CHF, JPY, and NZD
USD, SEK, and NOK
KRW, JPY, and HKD
USD, AUD, and HKD
Further Reading:
Heterogeneous Market-Making in Foreign Exchange Markets: Evidence from Individual Bank Responses to Central Bank Interventions (pdf)
Spread Components and Dealer Profits in the Interbank Foreign Exchange Market (pdf)
