Understanding FX liquidity

Item Type Presentation
Abstract Previous studies of liquidity in the foreign exchange (FX) market span short time periods or focus on specific measures of liquidity. In contrast, we provide a comprehensive study of FX liquidity and commonality over more than two decades and a cross-section of forty exchange rates. After identifying the most accurate liquidity proxies based on low-frequency and readily available data, we show that commonality in FX liquidities is stronger for developed currencies and in highly volatile markets. We also show that FX liquidity deteriorates with risk in stock, bond and FX markets, and that riskier currencies are more exposed to liquidity drops.
Authors Karnaukh, Nina; Ranaldo, Angelo & Söderlind, Paul
Language English
Keywords exchange rates, liquidity, transaction costs, commonality, low-frequency data
Subjects business studies
HSG Classification contribution to scientific community
Refereed No
Date 17 December 2013
Event Title Third workshop on financial determinants of exchange rates
Event Location I - Rome
Depositing User Nina Karnaukh
Date Deposited 10 Jan 2014 10:59
Last Modified 22 Mar 2023 01:22
URI: https://www.alexandria.unisg.ch/publications/228523


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Karnaukh, Nina; Ranaldo, Angelo & Söderlind, Paul: Understanding FX liquidity. Third workshop on financial determinants of exchange rates. I - Rome, 17 December 2013.


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