全球智库信息集成服务系统(G2TT): DP2658 Nonlinear Mean-Reversion in Real Exchange Rates: Towards a Solution to the Purchasing Power Parity Puzzles

G2TT

来源类型	Discussion paper
规范类型	论文
来源ID	DP2658
	DP2658 Nonlinear Mean-Reversion in Real Exchange Rates: Towards a Solution to the Purchasing Power Parity Puzzles
	Mark Taylor; David Peel; LUCIO SARNO
发表日期	2001-01-30
出版年	2001
语种	英语
摘要	This paper derives arbitrage trading strategies taking into account the fact that the actions of arbitrageurs impact prices. This avoids the difficulty of having to rely on exogenous position limits to prevent infinite arbitrage profits. When arbitrageurs are financially constrained their trading strategies can be expressed as feedback functions of their capital, which in turn depends on the optimal amount traded. An important component of the trading by financially constrained arbitrageurs is done to guarantee future financial flexibility. It is this hedging component that explains why price deviations persist in spite of arbitrage. Financial constraints are also responsible for periods of excessively volatile prices and for the time variation in the correlation of price deviation across markets. The fact that the actions of regulated firms can influence the dynamics of prices on which minimum capital requirements are based raises important implications for the regulation of securities firms.
主题	Financial Economics
关键词	Arbitrage Large traders Market liquidity Financial supervision
URL	https://cepr.org/publications/dp2658
来源智库	Centre for Economic Policy Research (United Kingdom)
资源类型	智库出版物
条目标识符	http://119.78.100.153/handle/2XGU8XDN/531719
推荐引用方式 GB/T 7714	Mark Taylor,David Peel,LUCIO SARNO. DP2658 Nonlinear Mean-Reversion in Real Exchange Rates: Towards a Solution to the Purchasing Power Parity Puzzles. 2001.