Market power can explain financial market anomalies – BIS paper

FX currencies

In a new paper, a team of researchers studies how the behaviour of intermediaries in the foreign exchange market explains a number of anomalies.

In An Intermediation-Based Model of Exchange Rates, published by the Bank for International Settlements, the authors develop two models: a domestic model where households have free access to domestic financial securities; and an international model where households must use intermediaries to gain access to global financial securities.

Semyon Malamud

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