Volatility and Depth in Commodity and FX Futures Markets

Alexandre Aidov and Olesya Lobanova
Additional contact information
Alexandre Aidov: College of Business, University of Houston-Victoria, Victoria, TX 77901, USA
Olesya Lobanova: College of Business, University of Houston-Victoria, Victoria, TX 77901, USA

JRFM, 2021, vol. 14, issue 11, 1-16

Abstract: Prior theory suggests a positive relation between volatility and market depth, while past empirical research finds contrasting results. This paper examines the relation between the volatility and the limit order book depth in commodity and foreign exchange futures markets during a turbulent time using the generalized method of moments (GMM). Results indicate a negative relation between volatility and depth and suggest that the depth in the limit order book decreases as volatility increases. Findings help to understand how market participants provide liquidity in response to shifts in prices.

Keywords: market depth; volatility; futures market (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://www.mdpi.com/1911-8074/14/11/545/pdf (application/pdf)
https://www.mdpi.com/1911-8074/14/11/545/ (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:gam:jjrfmx:v:14:y:2021:i:11:p:545-:d:676575

Access Statistics for this article

JRFM is currently edited by Ms. Chelthy Cheng

More articles in JRFM from MDPI
Bibliographic data for series maintained by MDPI Indexing Manager ().