A dealer in pounds who thinks that the exchange rate is about to increase in volatility

Question

Quizplus · Accepted Answer

A dealer who thinks that the exchange rate is about to increase in volatility may want to widen his bid-ask spread to account for potential price fluctuations and minimize the risk of losses. This allows the dealer to earn a higher profit margin while still offering competitive prices to customers. Decreasing the bid-ask spread or lowering the ask price would increase the dealer's risk exposure and potentially result in lower profits.

A Dealer in Pounds Who Thinks That the Exchange Rate