Forex volatility can boost liquidity – BIS paper
Price volatility might not always be a bad thing for market liquidity, authors find
A degree of volatility appears to improve liquidity in foreign exchange markets, according to a working paper published today (April 25) by the Bank for International Settlements.
Authors Jakree Koosakul and Ilhyock Shim study the Thai forex spot market – particularly the baht/dollar currency pair – in their paper, The beneficial aspect of FX volatility for market liquidity. They find a positive and significant effect of volatility on trading volume.
Further analysis implies there is a
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