Understanding FX Liquidity

• 成果类型: Article
• 署名作者: Karnaukh, Nina; Ranaldo, Angelo; Soederlind, Paul
• 署名单位: University of St Gallen
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhv029
• 发表日期: 2015
• 页码: 3073
• 关键词: bid-ask spreads; market liquidity; STOCK; returns; RISK; prices; illiquidity; volatility; bond; COMMONALITY

摘要

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.