This paper develops a liquidity measure tailored to the foreign exchange (FX) market, quantifies the amount of commonality in liquidity across exchange rates, and determines the extent of liquidity risk premiums embedded in FX returns. The new liquidity measure utilizes ultra high frequency data...

In reaction to recent requests for interoperability between central counterparties of European stock markets, regulators have issued new guidelines to contain systemic risk. Our analysis confirms that the currently applied cross-CCP risk management model can be a source of contagion,...

Arbitrage normally ensures that covered interest parity (CIP) holds. Until recently, excess profits, if any, were documented to last merely seconds and reach a few pips. Instead, this paper finds that following the Lehman bankruptcy, these were large, persisted for months and involved strategies...

This paper introduces a methodology to estimate the re-use of collateral based on actual transaction data. With a comprehensive dataset from the Swiss franc repo market we are able to provide the first systematic empirical study on the re-use of collateral. We find that re-use was most popular...

The Euro Crisis has stopped the process of the European financial integration and triggered a strong repatriation of debt from foreign to domestic investors. We investigate this empirical pattern in light of competing theories of cross-border portfolio allocation. Three empirical regularities...

Deviations of national industrial production indexes from trend explain time variation in excess returns on the G7 countries' stock markets. This paper highlights that this finding is driven by a global, common component in the national production gaps. The global component is not a mirror image...

Momentum in foreign stock market returns is exploitable as signal of currency excess returns. Past stock market winner currencies offer higher returns than past stock market loser currencies. This finding is unrelated to interest rate differentials. Funding liquidity risk explains the time...

We study high-frequency exchange rate movements over the sample 1993-2006. We document that the (Swiss) franc, euro, Japanese yen and the pound tend to appreciate against the U.S. dollar when (a) S&P has negative returns; (b) U.S. bond prices increase; and (c) when currency markets become more...

Household borrowing in a foreign currency is a widespread phenomenon in Austria. Twelve percent of Austrian households report their housing loan to be denominated in either Swiss franc or Japanese yen for example. Yet, despite its importance, peculiar character, and immediate policy concerns, we...

We analyze the financial integration of the new European Union (EU) member states' stock markets using the negative (positive) coexceedance variable that counts the number of large negative (large positive) returns on a given day across the countries. We use a multinomial logit model to...