Price response functions and spread impact in foreign exchange markets

In this study, we analyzed tick data from the foreign exchange market.

The data contains the best bid price and the best ask price. With these information we compute the midpoint price and the trade signs. Then we obtain the price response functions in two different time scale for different years. Using the spread values, we group the foreign exchange pairs to average their responses and check any group behavior.

In order to avoid overnight effects and any artifact due to the opening and closing of the market, we systematically discarded the first ten and the last ten minutes of a trading in a given week. Therefore, we only consider trades of the same week from Sunday 17:10:00 to Friday 16:50:00 New York local time. We will refer to this interval of time as the “market time”.

The main objective of this work is to analyze the price response functions. In general we define the self-response functions in a foreign exchange market as

\[R^{scale}_{ii}\left(\tau\right)=\left\langle r^{scale}_{i}\left(t-1, \tau\right) \cdot\varepsilon^{scale}_{i} \left(t\right)\right\rangle _{scale}\]

In the following can be seen the documentation of all the code used in the project.

Contents:

• HIST Download Data
  • Modules
• HIST Data Extraction
  • Modules
• HIST Responses Trade
  • Modules
• HIST Physical Basic Data
  • Modules
• HIST Responses Physical
  • Modules
• HIST Average Spread
  • Modules
• HIST Average Responses
  • Modules

Indices and tables

• Index
• Module Index
• Search Page