In this paper, I provide evidence that currency stop-loss orders contribute to rapid, self-reinforcing price movements, or "price cascades". Stop-loss orders, which instruct a dealer to buy (sell) a certain amount of currency at the market rate once the rate has risen (fallen) to a prespecified...

This paper presents a theoretical model of exchange-rate determination intended to address the forward premium puzzle. It also explains the empirical observation that risk premiums depend on interest differentials. The model's closed-form solution indicates that currency risk premiums depend on...

In this paper, I provide evidence that currency stop-loss orders contribute to rapid, self-reinforcing price movements, or "price cascades." Stop-loss orders, which instruct a dealer to buy (sell) a certain amount of currency at the market rate once the rate has risen (fallen) to a prespecified...

This paper provides a microstructural explanation for the success of two familiar predictions from technical analysis: 1) trends tend to be reversed at predictable support and resistance levels, and 2) trends gain momentum once predictable support and resistance levels are crossed. ; The...

This paper provides evidence that informed traders dominate the response of limit-order submissions to shocks in a pure limit-order market. In the market we study, informed traders are highly sensitive to spreads, volatility, momentum and depth. By contrast, uninformed traders are relatively...

This paper makes three contributions to our understanding of the price discovery process in currency markets. First, it provides evidence that this process cannot be the familiar one based on adverse selection and customer spreads, since such spreads are inversely related to a trade’s likely...