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Traders, Market Microstructure and Exchange Rate Dynamics
Cheung, Yin-Wong - 1999
We report findings from a survey of United States foreign exchange traders. Our results indicate that: (i) The share of customer business, versus interbank business, has remained fairly constant; (ii) The channels by which transactions take place have changed, as electronically-brokered...
Persistent link: https://www.econbiz.de/10012471365
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Modeling the Impacts of Market Activity on Bid-Ask Spreads in the Option Market
Cho, Young-Hye - 1999
using transactions data. We propose a new market microstructure theory which we call derivative hedge theory, in which … volume as a measure of liquidity and supports the derivative hedge theory. Option market spreads are positively related to … spreads in the underlying market, again supporting our theory. However, option market duration does affect option market …
Persistent link: https://www.econbiz.de/10012471453
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Order Flow and Exchange Rate Dynamics
Evans, Martin D.D. - 1999
Macroeconomic models of nominal exchange rates perform poorly. In sample, R2 statistics as high as 10 percent are rare. Out of sample, these models are typically out-forecast by a na‹ve random walk. This paper presents a model of a new kind. Instead of relying exclusively on macroeconomic...
Persistent link: https://www.econbiz.de/10012471467
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Inventory Information
Cao, H. Henry - 2003
In a market with symmetric information about fundamentals, can information-based trade still arise? Consider bond and FX markets, where private information about nominal cash flows is generally absent, but participants are convinced that superior information exists. We analyze a class of...
Persistent link: https://www.econbiz.de/10012468804
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Middlemen versus Market Makers : A Theory of Competitive Exchange
Rust, John - 2002
We present a model in which the microstructure of trade in a commodity or asset is endogenously determined. Producers and consumers of a commodity (or buyers and sellers of an asset) who wish to trade can choose between two competing types of intermediaries: 'middlemen' (dealer/brokers) and...
Persistent link: https://www.econbiz.de/10012469831
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Japan's Big Bang and the Transformation of Financial Markets
Ito, Takatoshi - 1999
A first step in the 'big bang' markets was the deregulation of the foreign exchange market on April 1, 1998. This paper examines how the bid-ask spread and conditional volatility in the yen/dollar foreign exchange market changed around the time of the deregulation. Intra-day data are analyzed...
Persistent link: https://www.econbiz.de/10012471543
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Puzzles in the Forex Tokyo “Fixing” : Order Imbalances and Biased Pricing by Banks
Ito, Takatoshi - 2016
"Fixing" in the foreign exchange market is a market practice that determines the bid-ask-mid-point exchange rate at a scheduled time, 10am in Tokyo and 4pm in London. The fixing exchange rate is then applied to the settlement of foreign exchange transactions between banks and retail customers...
Persistent link: https://www.econbiz.de/10012455860
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Free Lunch! Arbitrage Opportunities in the Foreign Exchange Markets
Ito, Takatoshi - 2012
Using the "firm" quotes obtained from the tick-by-tick EBS (electronic broking system that is a major trading platform for foreign exchanges) data, it is found that risk-free arbitrage opportunities--free lunch--do occur in the foreign exchange markets, but it typically last only a few seconds....
Persistent link: https://www.econbiz.de/10012460119
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How Do UK-Based Foreign Exchange Dealers Think Their Market Operates?
Cheung, Yin-Wong - 2000
This paper summarises the results of a survey of UK based foreign exchange dealers conducted in 1998. It addresses topics in three main areas: The microeconomic operation of the foreign exchange market; the beliefs of dealers regarding the importance, or otherwise, of macroeconomic fundamental...
Persistent link: https://www.econbiz.de/10012471250
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Foreign Exchange Order Flow as a Risk Factor
Burnside, Craig - 2020
This paper proposes a set of novel pricing factors for currency returns that are motivated by microstructure models. In so doing, we bring two strands of the exchange rate literature, namely market-microstructure and risk-based models, closer together. Our novel factors use order flow data to...
Persistent link: https://www.econbiz.de/10012481782