| Item Type |
Monograph
(Working Paper)
|
| Abstract |
A key issue raised by the rapid growth of computerised algorithmic trading is how it responds in extreme situations. Using data on foreign exchange orders and transactions that includes identification of algorithmic trading, we find that this type of trading contributed to the deterioration of market quality following the removal of the cap on the Swiss franc on 15 January 2015, which was an event that came as a complete surprise to market participants. In particular, we find that algorithmic traders withdrew liquidity and generated uninformative volatility in Swiss franc currency pairs, while human traders did the opposite. However, we find no evidence that algorithmic trading propagated these adverse effects on market quality to other currency pairs. |
| Authors |
Breedon, Francis; Chen, Louisa; Ranaldo, Angelo & Vause, Nicholas |
| Language |
English |
| Keywords |
Swiss franc, algorithmic trading, liquidity, volatility, price discovery, arbitrage opportunities |
| Subjects |
finance |
| HSG Classification |
contribution to scientific community |
| Date |
16 February 2018 |
| Publisher |
SoF HSG |
| Series Name |
School of Finance Working Paper Series |
| Volume |
2018 |
| Number |
08 |
| Official URL |
https://papers.ssrn.com/sol3/papers.cfm?abstract_i... |
| Depositing User |
Christina Ihasz
|
| Date Deposited |
27 Feb 2018 10:27 |
| Last Modified |
24 Feb 2022 01:25 |
| URI: |
https://www.alexandria.unisg.ch/publications/253760 |
Judgement Day: Algorithmic Trading Around the Swiss Franc Cap Removal
