Paolo Santucci de Magistris (LUISS) - Brown Bag Seminar on "Liquidity in the FX market"

Relatore
Paolo Santucci de Magistris - LUISS

Data
27-nov-2018 - Ora: 14:00 Polo Santa Marta, Via Cantarane 24, Sala Vaona

We provide a unified model for foreign exchange (FX), trading volume, and volatility

in a multi-currency environment. Tied by arbitrage conditions, FX rates are determined

by common information and trader-specific components generating heterogeneous

reservation prices thus inducing trading. Our model outlines new properties including

volume-volatility relationships between direct and synthetic FX rates. It also provides

a theoretical foundation for commonalities of volume, volatility, and illiquidity across

currencies and time, and an intuitive closed-form solution for the price impact measure.

Using unique (intraday) data representative for the global FX spot market, the

empirical analysis validates our theoretical predictions.

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