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Price-setting in the foreign exchange swap market : evidence from order flow
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Syrstad, Olav and Viswanath-Natraj, Ganesh (2022) Price-setting in the foreign exchange swap market : evidence from order flow. Journal of Financial Economics, 146 (1). pp. 119-142. doi:10.1016/j.jfineco.2022.07.004 ISSN 0304-405X.
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Official URL: http://dx.doi.org/10.1016/j.jfineco.2022.07.004
Abstract
Using transaction level data from the inter-dealer market, we find that the price impact of one standard deviation change in FX swap order flow has increased from less than one basis point prior to 2008 to about five basis points after 2008. However, the increase in price impact is confined to periods of elevated dispersion in funding costs and over quarterends. Central bank swap lines reduce the order flow into USD, subsequently affecting the FX forward rate. In contrast, over quarter-ends and after monetary policy announcements we observe that dealers immediately adjust prices to curb order flow.
Item Type: | Journal Article | ||||||||
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Subjects: | H Social Sciences > HB Economic Theory H Social Sciences > HG Finance |
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Divisions: | Faculty of Social Sciences > Warwick Business School | ||||||||
Library of Congress Subject Headings (LCSH): | Interest rates, Foreign exchange rates, Currency swaps | ||||||||
Journal or Publication Title: | Journal of Financial Economics | ||||||||
Publisher: | Elsevier Science BV | ||||||||
ISSN: | 0304-405X | ||||||||
Official Date: | October 2022 | ||||||||
Dates: |
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Volume: | 146 | ||||||||
Number: | 1 | ||||||||
Page Range: | pp. 119-142 | ||||||||
DOI: | 10.1016/j.jfineco.2022.07.004 | ||||||||
Status: | Peer Reviewed | ||||||||
Publication Status: | Published | ||||||||
Access rights to Published version: | Open Access (Creative Commons) | ||||||||
Date of first compliant deposit: | 19 August 2022 | ||||||||
Date of first compliant Open Access: | 19 August 2022 |
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