Using a novel and comprehensive dataset, we provide the first systematic study of liquidity in the foreign exchange (FX) market. Contrary to common perceptions, we find significant variation in liquidity across exchange rates, substantial costs due to FX illiquidity, and strong commonality in...

This supplemental appendix extends the results in Mancini, Ranaldo, and Wrampelmeyer (2011), presenting additional analyses and robustness checks. It also describes the cleaning procedure of the EBS data, compares EBS to other datasets, and discusses the robust estimation of the price impact model

We develop a novel class of time-changed Lévy models which are tractable and readily applicable, capture the leverage effect, and exhibit pure jump processes with finite or infinite activity. Our models feature four nested processes reflecting market, volatility and jump risks, and observation...

We study the term structure of variance swaps, equity and variance risk premia. A model-free analysis reveals a significant price jump component in variance swap rates. A model-based analysis shows that investors' willingness to ensure against volatility risk increases after a market drop. This...