Profits and Position Control

Journal of International M peerlessy and Finance 17 Ž1998. 97 115 Profits and position control: a calendar week of FX dealing Richard K. LyonsU,† U.C. Berkeley and NBER, Haas prepare of Business, U.C. Berkeley, Berkeley, CA 94720-1900, USA Abstract This business relationship examines foreign exchange business at the star level. The star we track averages $100 000 in profits per day on volume of $1 million per day Žor one basis point.. The half-life of the dealers position is however 10 min, providing strong corroborate for inventory models. A methodological innovation allows us to invest his speculative position over time. This speculative position determines the per centum of profits deriving from speculation versus intermediation: intermediation is oftentimes more important. 1998 Elsevier Science Ltd. All rights reserved. JEL classifications: G15; F31 empirical work on FX microstructure is still in its previous(predicate) stages. The earliest work ap ply futures data since that was available at mellow frequencies.1 In FX, however, the futures commercialise is both much smaller than greet and tightly tie in to spot through arbitrage. Moreover, early data sets did not take a leak decent granularity to capture agent heterogeneity, the hallmark of the microstructure approach.

exert on the spot market itself grew in the early nineties with the availableness of quotes on an U † Tel.: q1 510 6421059; fax: q1 510 6424700; e-mail: lyons@haas.berkeley.edu I convey the following for helpful comments: Jeff Bohn, Frank Diebold, Bernard Dumas, butt Flood, barb Meese, Mark Ready, Andrew Rose, Patrik Safv! enblad, Matt Spiegel, Avanidhar Subrahmanyam, ¨ and seminar participants at Berkeley, UCLA, the federal official Reserve Board, the federal official Reserve Bank of New York, the NBER, and the Stockholm School of Economics. I also thank Jeff Bohn for valuable research assistance. Parts of this opus were written while visiting the IIES at Stockholm University and I thank them for their hospitality. Financial assistance from the National Science presentation and...If you want to get a full essay, order it on our website: OrderCustomPaper.com

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