EconPapers    
Economics at your fingertips  
 

Liquidity Problems in the FX Liquid Market

Vladimir Borgy, Julien Idier and Gaelle Le Fol

Working Papers from HAL

Abstract: Even though the FX market is one of the most liquid financial market, it would be an error to consider that it is immune against any liquidity problem. This paper analyzes on a long sample (2000-2009), the all set of quotes and transactions in three main currency pairs (EURJPY, EURUSD, USDJPY) on the EBS platform. To characterize the FX market liquidity, we consider the spread, the traded volume, the number of transactions and the Amihud (2002) statistic for illiquidity. We also propose the computation of a new liquidity indicator, BIL, that solely relies on price series availability. The main benefit of such measure is to be easily calculated on almost any financial market as well as to have a clear interpretation in terms of liquidity costs. Using all these advanced liquidity analyses, we finally test the accuracy of these measures to detect liquidity problems in the FX market. Our analysis, based on a signaling approach, shows that liquidity problems have arisen during specific episodes in the early 2000's and more generally during the recent financial turmoil.

Keywords: Marché des changes; liquidité; crises financières; FX market; Liquidity; financial crisis (search for similar items in EconPapers)
Date: 2010
Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-00539985
References: View complete reference list from CitEc
Citations View citations in EconPapers (1) Track citations by RSS feed

Downloads: (external link)
https://halshs.archives-ouvertes.fr/halshs-00539985/document (application/pdf)

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:hal:wpaper:halshs-00539985

Access Statistics for this paper

More papers in Working Papers from HAL
Bibliographic data for series maintained by CCSD ().

 
Page updated 2018-09-11
Handle: RePEc:hal:wpaper:halshs-00539985