English, Article edition: 'Noise-trader risk' and Bayesian market making in FX derivatives: rolling loaded dice? Karen Hovsepian; Carlos A. Ulibarri; Peter C. Anselmo; ...

User activity

Share to:
 
Bookmark: http://trove.nla.gov.au/version/139157
Physical Description
  • article
Language
  • English

Edition details

Title
  • 'Noise-trader risk' and Bayesian market making in FX derivatives: rolling loaded dice?
Author
  • Karen Hovsepian
  • Carlos A. Ulibarri
  • Peter C. Anselmo
  • Karen Hovespian
  • Jacob Tolk
  • Ionut Florescu
Physical Description
  • article
Notes
  • The above article (DOI: <DOI HREF=​"10.1002/​ijfe.373">10.1002|ijfe.373 ) was published online in Early View on 25 July 2008. On page 1 of the initial online publication of this article, the third author's surname was incorrectly spelled. The correct spelling should be: KAREN HOVSEPIAN.
  • RePEc:ijf:ijfiec:v:14:y:2009:i:3:p:i-i
  • This paper develops and simulates a model of a Bayesian market maker who transacts with noise and position traders in derivative markets. The impact of noise trading is examined relative to price determination in FX futures, noise transmission from futures to options, and risk-management behaviour linking the two markets. The model simulations show noise trading in futures results in wider bid-ask spreads, increased price volatility, and greater variation in hedging costs. Above all, the Bayesian market maker manages price-risk by trend chasing not for speculative purposes, but to avoid being caught on the wrong side of the market. The pecuniary effects from this risk-management strategy suggest that noise trading tends to constrain the market maker's capacity to arbitrage; particularly when the underlying price is mean averting as opposed to a Martingale and trading sessions exhibit significant price volatility. Copyright © 2008 John Wiley &​ Sons, Ltd.
  • RePEc:ijf:ijfiec:v:14:y:2009:i:3:p:268-279
Language
  • English
Contributed by
OAIster

Get this edition

Other links

  • Set up My libraries

    How do I set up "My libraries"?

    In order to set up a list of libraries that you have access to, you must first login or sign up. Then set up a personal list of libraries from your profile page by clicking on your user name at the top right of any screen.

  • All (1)
  • Unknown (1)
None of your libraries hold this item.
None of your libraries hold this item.
None of your libraries hold this item.
None of your libraries hold this item.
None of your libraries hold this item.
None of your libraries hold this item.
None of your libraries hold this item.
None of your libraries hold this item.

User activity


e.g. test cricket, Perth (WA), "Parkes, Henry"

Separate different tags with a comma. To include a comma in your tag, surround the tag with double quotes.

Be the first to add a tag for this edition

Be the first to add this to a list

Comments and reviews

What are comments? Add a comment

No user comments or reviews for this version

Add a comment