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Moore, Michael J. and Roche, Maurice J. (2001) Liquidity in the forward exchange market. Journal of Empirical Finance, 8 (2). pp. 157-170. ISSN 0927-5398
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Abstract
The forward foreign exchange market is modelled within the framework of a limited participation two-country model and then simulated using the artificial economy methodology. The new model improves on the standard two-country cash-in-advance model in a number of ways. It gets closer to the observed lack of autocorrelation in spot returns and it helps to explain the persistence in the forward discount. However, it cannot account for the relative volatilities of spot returns and the forward discount. Finally, the model goes some distance in explaining the forward discount bias puzzle but falls short of resolving it.
| Item Type: | Article |
|---|---|
| Keywords: | Artificial economy; Forward foreign exchange; Cash in advance; Liquidity; |
| Academic Unit: | Faculty of Social Sciences > Economics, Finance and Accounting |
| Item ID: | 20827 |
| Identification Number: | 10.1016/S0927-5398(01)00019-6 |
| Depositing User: | IR Editor |
| Date Deposited: | 11 Nov 2025 15:07 |
| Journal or Publication Title: | Journal of Empirical Finance |
| Publisher: | Elsevier |
| Refereed: | Yes |
| Related URLs: | |
| Use Licence: | This item is available under a Creative Commons Attribution Non Commercial Share Alike Licence (CC BY-NC-SA). Details of this licence are available here |
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