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...

Does the presence of arbitrageurs decrease equilibrium asset price volatility? I study an economy with arbitrageurs, informed investors, and noise traders. Arbitrageurs face a trade-off between arbitrage and inference: they would like to buy assets in response to temporary price declines (the...