First Steps in Foreign Exchange Transaction Cost Analysis

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Foreign exchange (FX) transactions are significant components of millions of daily financial transactions, yet most currency transactions are rarely measured. Failure to measure transactions makes managing transaction costs difficult, if not impossible. Unlike the equity and fixed income markets where transaction cost analysis is well established (FX) transaction measurement is not standard market practice. This article presents two methods for measuring FX transaction costs.

Author: Michael DuCharme, Russell Investment Group

Foreign exchange (FX) transactions are significant components of millions of daily financial transactions, yet most currency transactions are rarely measured. Failure to measure transactions makes managing transaction costs difficult, if not impossible. Unlike the equity and fixed income markets where transaction cost analysis is well established (FX) transaction measurement is not standard market practice. This article presents two methods for measuring FX transaction costs.

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