Related papers: Foreign Exchange Markets with Last Look
Dealers in foreign exchange markets provide bid and ask prices to their clients at which they are happy to buy and sell, respectively. To manage risk, dealers can skew their quotes and hedge in the interbank market. Hedging offers certainty…
We develop the optimal trading strategy for a foreign exchange (FX) broker who must liquidate a large position in an illiquid currency pair. To maximize revenues, the broker considers trading in a currency triplet which consists of the…
We investigate triangular arbitrage within the spot foreign exchange market using high-frequency executable prices. We show that triangular arbitrage opportunities do exist, but that most have short durations and small magnitudes. We find…
In FX cash markets, market makers provide liquidity to clients for a wide variety of currency pairs. Because of flow uncertainty and market volatility, they face inventory risk. To mitigate this risk, they typically skew their prices to…
After a market downturn, especially in an uncertain economic environment such as the current state, there can be a relatively long period with a sideways market, where indexes, stocks, etc., move in channels with support and resistance…
Dealers make money by providing liquidity to clients but face flow uncertainty and thus price risk. They can efficiently skew their prices and wait for clients to mitigate risk (internalization), or trade with other dealers in the open…
Lead-lag relationships among assets represent a useful tool for analyzing high frequency financial data. However, research on these relationships predominantly focuses on correlation analyses for the dynamics of stock prices, spots and…
We consider learning a trading agent acting on behalf of the treasury of a firm earning revenue in a foreign currency (FC) and incurring expenses in the home currency (HC). The goal of the agent is to maximize the expected HC at the end of…
An investor with constant relative risk aversion trades a safe and several risky assets with constant investment opportunities. For a small fixed transaction cost, levied on each trade regardless of its size, we explicitly determine the…
In this article, we provide a flexible framework for optimal trading in an asset listed on different venues. We take into account the dependencies between the imbalance and spread of the venues, and allow for partial execution of limit…
We investigate high frequency price dynamics in foreign exchange market using data from Reuters information system (the dataset has been provided to us by Ols en & Associates). In our analysis we show that a na\"ive approach to the…
As the FX markets continue to evolve, many institutions have started offering passive access to their internal liquidity pools. Market makers act as principal and have the opportunity to fill those orders as part of their risk management,…
We suggest an intermediate currency approach that allows us to price options on all FX markets simultaneously under the same risk-neutral measure which ensures consistency of FX option prices across all markets. In particular, it is…
We develop robust pricing and hedging of a weighted variance swap when market prices for a finite number of co--maturing put options are given. We assume the given prices do not admit arbitrage and deduce no-arbitrage bounds on the weighted…
We study the long memory of order flow for each of three liquid currency pairs on a large electronic trading platform in the foreign exchange (FX) spot market. Due to the extremely high levels of market activity on the platform, and in…
We derive the arbitrage gains or, equivalently, Loss Versus Rebalancing (LVR) for arbitrage between \textit{two imperfectly liquid} markets, extending prior work that assumes the existence of an infinitely liquid reference market. Our…
A market fix serves as a benchmark for foreign exchange (FX) execution, and is employed by many institutional investors to establish an exact reference at which execution takes place. The currently most popular FX fix is the World Market…
This paper proposes a new one-sided matching market model in which every agent has a cost function that is allowed to take a negative value. Our model aims to capture the situation where some agents can profit by exchanging their obtained…
I examine global dynamics in a monetary model with overlapping generations of finite-horizon agents and a binding lower bound on nominal interest rates. Debt targeting rules exacerbate the possibility of self-fulfilling liquidity traps, for…
We consider an optimal trading problem over a finite period of time during which an investor has access to both a standard exchange and a dark pool. We take the exchange to be an order-driven market and propose a continuous-time setup for…