In this paper we investigate FX arbitrage and its relationship with market liquidity in
emerging economies using a novel and unique dataset of tradable (firm) spot and
forward HKD/USD quotes as well as tradable Hong Kong dollar- and US dollardenominated
deposit rates over four short-term maturity tenors. We find, in contrast
with much empirical literature, that 1) the HKD/USD market is characterized by the
presence of a large number of arbitrage opportunities 2) FX arbitrage opportunities
positively correlate with the illiquidity of the HKD/USD spot and forward markets,
and of the deposit markets 3) the economic value of these arbitrage opportunities is
large and sizable even by taking into account realistic transaction costs. These
findings are overall supportive of Roll et al. (2007) in the context of FX markets and
suggest that there may be more economic substance to FX arbitrage, especially in
emerging economies, than previously thought.
학술대회/행사
학술대회안내
[2008년 제 4차] FX Arbitrage and Market Liquidity in Emerging Marke
작성자 : 관리자
조회수 : 962
게시일 :
2008-12-11