Information or Market Power: What is Governing Dealers’ Pricing Behaviour in FX Markets?
An Investigation in the Spirit of the Microstructure Approach to Exchange Rates
©2008
Thesis
XII,
248 Pages
Series:
Studien zu Internationalen Wirtschaftsbeziehungen, Volume 13
Summary
The microstructure approach provides valuable insights into high-frequent exchange rate dynamics. Recent studies, including this book, evidence the prominence of information asymmetries for asset pricing as well as order flow’s important role during information aggregation processes via trading. However, results indicate that dealers quote prices in contrast to predictions of standard theory of asset pricing under asymmetric information. By analysing a unique data set of EUR/USD transactions at a German bank, this work investigates whether this pricing behaviour is due to dealers’ strategic dealing considerations or traders’ relative market power. The study concludes that it is market power rather than strategic dealing that determines dealers’ pricing strategy.
Details
- Pages
- XII, 248
- Publication Year
- 2008
- ISBN (Softcover)
- 9783631579282
- Language
- English
- Keywords
- Asymmetrische Information Devisenmarkt Wechselkurs Exchange rate economic High-frequency finance Market power Forecasting
- Published
- Frankfurt am Main, Berlin, Bern, Bruxelles, New York, Oxford, Wien, 2008. XII, 248 pp., num. tables
- Product Safety
- Peter Lang Group AG