Liquidity in the Foreign Exchange Market:Measurement, Commonality, and Risk Premiums

This paper develops a liquidity measure tailored to the foreign exchange (FX) market, quanties the amount of commonality in liquidity across dierent exchange rates, and determines theextent of liquidity risk premiums embedded in FX returns. The new liquidity measure utilizesultra high frequency data and captures cross-sectional and temporal variation in FX liquidityduring the nancial crisis of 2007{2008. As sudden shocks to market-wide liquidity have importantimplications for regulators and investors, liquidity is decomposed into an idiosyncratic anda common component.[...]

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Year of publication:	2009-11-19
Authors:	Mancini, Loriano ; Ranaldo, Angelo ; Wrampelmeyer, Jan
Institutions:	National Centre of Competence in ResearchFinancial Valuation and Risk Management
Subject:	Liquidität \| Risikoprämie \| Devisenmarkt \| Messung \| Measurement

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Extent:	1280000 bytes 50 p. application/pdf
Series:	FINRISK Working Paper Series Working Paper ; No. 590 (2009)
Type of publication:	Book / Working Paper
Language:	English
Classification:	F31 - Foreign Exchange ; G01 - Financial Crises ; G12 - Asset Pricing ; G15 - International Financial Markets ; Financial theory ; Capital budgeting, budgetary planning and budgetary control ; Management of financial services: stock exchange and bank management science (including saving banks) ; Individual Working Papers, Preprints ; Global Resources
Source:	USB Cologne (business full texts)

Persistent link: https://www.econbiz.de/10005868531