Incorporating derivative order flow in foreign exchange microstructure theory

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dc.contributor.authorCondon, Kieranen_ZA
dc.date.accessioned2014-07-31T12:26:39Z
dc.date.available2014-07-31T12:26:39Z
dc.date.issued2008en_ZA
dc.descriptionIncludes abstract.
dc.descriptionIncludes bibliographical references (p. 36-38).
dc.description.abstractThis paper justifies the claim that orders on exchange rate derivatives, including forwards, swaps and options, have a place in exchange rate determination. A simple option model based on Kyle (1985) is presented illustrating that option order flow informs traders about expectations of future exchange rates. The model is placed in a complete market where options are replicable thus conveying the same information as spot orders. A proposal is made that forward order flow has a variable impact on spot rates, depending on the extent to which they are used in hedging activities and must be treated separately to spot orders. Finally, the construction of FX swap order flow could be achieved by considering only the spot leg of the swap transaction as the forward leg in a swap is necessarily a hedging tool with no effect on rates.en_ZA
dc.identifier.apacitationCondon, K. (2008). <i>Incorporating derivative order flow in foreign exchange microstructure theory</i>. (Thesis). University of Cape Town ,Faculty of Commerce ,School of Economics. Retrieved from http://hdl.handle.net/11427/5775en_ZA
dc.identifier.chicagocitationCondon, Kieran. <i>"Incorporating derivative order flow in foreign exchange microstructure theory."</i> Thesis., University of Cape Town ,Faculty of Commerce ,School of Economics, 2008. http://hdl.handle.net/11427/5775en_ZA
dc.identifier.citationCondon, K. 2008. Incorporating derivative order flow in foreign exchange microstructure theory. University of Cape Town.en_ZA
dc.identifier.ris TY - Thesis / Dissertation AU - Condon, Kieran AB - This paper justifies the claim that orders on exchange rate derivatives, including forwards, swaps and options, have a place in exchange rate determination. A simple option model based on Kyle (1985) is presented illustrating that option order flow informs traders about expectations of future exchange rates. The model is placed in a complete market where options are replicable thus conveying the same information as spot orders. A proposal is made that forward order flow has a variable impact on spot rates, depending on the extent to which they are used in hedging activities and must be treated separately to spot orders. Finally, the construction of FX swap order flow could be achieved by considering only the spot leg of the swap transaction as the forward leg in a swap is necessarily a hedging tool with no effect on rates. DA - 2008 DB - OpenUCT DP - University of Cape Town LK - https://open.uct.ac.za PB - University of Cape Town PY - 2008 T1 - Incorporating derivative order flow in foreign exchange microstructure theory TI - Incorporating derivative order flow in foreign exchange microstructure theory UR - http://hdl.handle.net/11427/5775 ER - en_ZA
dc.identifier.urihttp://hdl.handle.net/11427/5775
dc.identifier.vancouvercitationCondon K. Incorporating derivative order flow in foreign exchange microstructure theory. [Thesis]. University of Cape Town ,Faculty of Commerce ,School of Economics, 2008 [cited yyyy month dd]. Available from: http://hdl.handle.net/11427/5775en_ZA
dc.language.isoengen_ZA
dc.publisher.departmentSchool of Economicsen_ZA
dc.publisher.facultyFaculty of Commerceen_ZA
dc.publisher.institutionUniversity of Cape Town
dc.subject.otherEconomicsen_ZA
dc.titleIncorporating derivative order flow in foreign exchange microstructure theoryen_ZA
dc.typeMaster Thesis
dc.type.qualificationlevelMasters
dc.type.qualificationnameMComen_ZA
uct.type.filetypeText
uct.type.filetypeImage
uct.type.publicationResearchen_ZA
uct.type.resourceThesisen_ZA
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