Economics, Econometrics and Finance
4 years ago

Global investors outsmart local traders in forex market, impacting exchange rates.

1 view
Bulletin of the Czech Econometric Society
Continuous Time Decision-Making in a Partially Decentralized Multiple Dealership Forex Market and Equilibrium Exchange Rate
Alexis Derviz

Paper Summary

The article presents a model for how prices are set in a forex market with multiple dealers. Dealers use information from customer orders to decide on their own prices. Global investors, with access to quotes from multiple dealers and better information, make more accurate predictions than local investors or dealers. The study shows how these differences in information lead to changes in prices and order flows in the market.

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