BVD (Bovine Viral Diarrhea) and Mole

The idea is that a dealer with a larger inventory of the currency than desired will set a lower price to attract buyers. In addition we use the indicator model suggested by Huang and Stoll (1997). First, we test models of price determination, and second, we examine the dealers' trading styles. In particular, we examine more closely how dealers use different trading options to control their inventories. This means that eg low transparency has evolved endogenously. We start by testing whether dealer inventories are mean reverting. Details about direct interdealer trades and customer trades (eg bid and ask quotes, the amount and direction of trade) are only observed by ablaut two counterparties. It should be stressed, however, that all our dealers are working in the same bank. Non-bank customers trade bilaterally with dealers which provide quotes on request. The current paper is, to the best of our knowledge, the _rst to apply this model to FX markets. Cointegration means that order _ows have a permanent effect on prices. Electronic brokers announce best bid and ask prices and the direction (not amount) of all trades (voice-brokers announce a subset). When a dealer receives a trade, he will revise his expectations (upward ablaut case of a buy order and downward in case of a sell order) and set spreads to protect himself against informed traders. At least two major stock markets, however, the NASDAQ and Venereal Disease London Stock ablaut are organized as multiple dealership markets. We then use two well-known models to test for inventory and information effects on price. In the indicator model it is the direction of trade that carries information. His only possibility for inventory adjustment is to shade his quotes. Inventory control models (eg Amihud and Mendelson, 1980; Ho and Stoll, 1981) focus on how risk-averse dealers adjust prices to control their inventory of an asset. Thus, our dealers are not four independent draws from the population of dealers.