Advanced Search
MyIDEAS: Login to save this paper or follow this series

The tail risks of FX return distributions: a comparison of the returns associated with limit orders and market orders

Contents:

Author Info

  • john cotter
  • kevin dowd

Abstract

This paper measures and compares the tail risks of limit and market orders using Extreme Value Theory. The analysis examines realised tail outcomes using the Dealing 2000-2 electronic broking system based on completed transactions rather than the more common analysis of indicative quotes. In general, limit and market orders exhibit broadly similar tail behaviour, but limit orders have significantly heavier tails and larger tail quantiles than market orders.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://arxiv.org/pdf/1103.5661
File Function: Latest version
Download Restriction: no

Bibliographic Info

Paper provided by arXiv.org in its series Papers with number 1103.5661.

as in new window
Length:
Date of creation: Mar 2011
Date of revision:
Handle: RePEc:arx:papers:1103.5661

Contact details of provider:
Web page: http://arxiv.org/

Related research

Keywords:

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. John Cotter, 2005. "Tail behaviour of the euro," Applied Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 37(7), pages 827-840.
  2. Jon Danielsson & Richard Payne, 1999. "Real Trading Patterns and Prices in Spot Foreign Exchange Markets," FMG Discussion Papers dp320, Financial Markets Group.
  3. Danielsson, J. & de Haan, L. & Peng, L. & de Vries, C. G., 2001. "Using a Bootstrap Method to Choose the Sample Fraction in Tail Index Estimation," Journal of Multivariate Analysis, Elsevier, vol. 76(2), pages 226-248, February.
  4. Huisman, Ronald, et al, 2001. "Tail-Index Estimates in Small Samples," Journal of Business & Economic Statistics, American Statistical Association, American Statistical Association, vol. 19(2), pages 208-16, April.
  5. Martin D. D. Evans & Richard K. Lyons, 2002. "Order Flow and Exchange Rate Dynamics," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 110(1), pages 170-180, February.
  6. John Cotter, 2011. "Varying the VaR for Unconditional and Conditional Environments," Papers 1103.5649, arXiv.org.
  7. Koedijk, Kees G & Kool, Clemens J M, 1992. "Tail Estimates of East European Exchange Rates," Journal of Business & Economic Statistics, American Statistical Association, American Statistical Association, vol. 10(1), pages 83-96, January.
  8. Handa, Puneet & Schwartz, Robert A, 1996. " Limit Order Trading," Journal of Finance, American Finance Association, vol. 51(5), pages 1835-61, December.
  9. Roll, Richard, 1984. " A Simple Implicit Measure of the Effective Bid-Ask Spread in an Efficient Market," Journal of Finance, American Finance Association, vol. 39(4), pages 1127-39, September.
  10. Mittnik, Stefan & Paolella, Marc S. & Rachev, Svetlozar T., 2000. "Diagnosing and treating the fat tails in financial returns data," Journal of Empirical Finance, Elsevier, Elsevier, vol. 7(3-4), pages 389-416, November.
  11. Andersen T. G & Bollerslev T. & Diebold F. X & Labys P., 2001. "The Distribution of Realized Exchange Rate Volatility," Journal of the American Statistical Association, American Statistical Association, American Statistical Association, vol. 96, pages 42-55, March.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Ana-Maria Gavril, 2009. "Exchange Rate Risk: Heads or Tails," Advances in Economic and Financial Research - DOFIN Working Paper Series, Bucharest University of Economics, Center for Advanced Research in Finance and Banking - CARFIB 35, Bucharest University of Economics, Center for Advanced Research in Finance and Banking - CARFIB.
  2. Cotter, John & Dowd, Kevin, 2007. "Intra-Day Seasonality in Foreign Exchange Market Transactions," MPRA Paper 3502, University Library of Munich, Germany.
  3. Marco Rocco, 2011. "Extreme value theory for finance: a survey," Questioni di Economia e Finanza (Occasional Papers) 99, Bank of Italy, Economic Research and International Relations Area.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:arx:papers:1103.5661. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (arXiv administrators).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.