Q20. In a foreign currency quotation, does the size of the bid-ask spread increase with an increase in:

Exchange rate volatility?                    The size of dealer positions?

A.          No                                          No

B.          No                                          Yes

C.          Yes                                          No

D.          Yes                                          Yes

A. Answer A

B. Answer B

C. Answer C

D. Answer D

答案和详解如下：

Q20.   C  07 Modular Level I, Vol.1, pp 518-520       Study Session 6-31-b

The size of the spread increases (decreases) with increase (decreases) in volatility in exchange rates; the size of dealer position does not influence the size of the spread, but only the midpoint of the spread between the bid and the ask. In other words, only the midpoint moves in response to dealer positions, not the size of the spread.

h

thx

C