We prove a version of the Fundamental Theorem of Asset Pricing, which applies to Kabanov's approach to foreign exchange markets under transaction costs. The financial market is modelled by a d x d matrix-valued stochastic process Sigma_t_t=0^T specifying the mutual bid and ask prices between d...

Using a panel data set of U.S. non-financial firms with geographically segmented firm-level information on currency exposures, exchange rates, and foreign currency derivatives, we document that managers adjust derivatives holdings in response to past foreign exchange returns. We interpret this...

We present empirical evidence that the Thai exchange rate is driven in part by international investors' cross-border portfolio rebalancing decisions. Our results are based on two comprehensive, daily-frequency datasets of foreign exchange and equity market capital flows undertaken by nonresident...

The development of Asian foreign exchange markets has progressed appreciably in recent years. Data from the BIS Triennial Central Bank Survey indicate that the turnover of Asian currencies rose sharply between 2004 and 2007, financial institutions became more important customers, and the...

Using two newly available ultrahigh-frequency datasets, we investigate empirically how frequently one can sample certain foreign exchange and U.S. Treasury security returns without contaminating estimates of their integrated volatility with market microstructure noise. We find that one can...

This paper analyses mutual causalities between crude oil price and euro / US dollar exchange rate. Instead of focusing on long-run macroeconomic linkages like the bulk of therelevant literature, the present approach takes a financial markets perspective using daily data. The fast-running...

This study examines profits and speculation in the USD/EUR trading of a bank in Germanyover a four-month period. Dealing activity at the bank generates profits but speculation doesnot seem to contribute to this. We find that speculative positions fail to become profitablewithin a 30-minutes'...

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...