| Item Type |
Journal paper
|
| Abstract |
We provide a comprehensive study of the liquidity of spot foreign exchange (FX) rates over more than two decades and a large cross-section of currencies. First, we show that FX liquidity can be accurately measured with daily and readily available data. Second, we demonstrate that FX liquidity declines with funding constraints and global risk, supporting theoretical models relating funding and market liquidity. In these distressed circumstances, liquidity tends to evaporate more for developed and riskier currencies. Finally, we show stronger comovements of FX liquidities in distressed markets, especially when funding is constrained, volatility is high, and FX speculators incur losses. |
| Authors |
Karnaukh, Nina; Ranaldo, Angelo & Söderlind, Paul |
| Journal or Publication Title |
Review of Financial Studies |
| Language |
English |
| Keywords |
exchange rates, liquidity, transaction costs, commonality, low-frequency |
| Subjects |
business studies |
| HSG Classification |
contribution to scientific community |
| Refereed |
Yes |
| Date |
November 2015 |
| Publisher |
Oxford University Press |
| Place of Publication |
Cary, NC |
| Volume |
28 |
| Number |
11 |
| Page Range |
3073-3108 |
| ISSN |
0893-9454 |
| ISSN-Digital |
1465-7368 |
| Publisher DOI |
https://doi.org/10.1093/rfs/hhv029 |
| Depositing User |
Prof. Dr. Angelo Ranaldo
|
| Date Deposited |
22 Apr 2015 09:59 |
| Last Modified |
02 Feb 2023 01:23 |
| URI: |
https://www.alexandria.unisg.ch/publications/240626 |
Understanding FX Liquidity
