Curriculum vitae

Le Fol Gaëlle

Professeur des universités
DRM

gaelle.le_folping@dauphinepong.fr
Tel : 01 44 05 46 03
Bureau : P604

Publications

Articles

Darolles S., Le Fol G., Mero G. (2017), Mixture of Distribution Hypothesis: Analyzing daily liquidity frictions and information flows, Journal of Econometrics

The mixture of distribution hypothesis (MDH) model offers an appealing explanation for the positive relation between trading volume and volatility of returns. In this specification, the information flows constitute the only mixing variable responsible for all changes. However, this single static latent mixing variable cannot account for the observed short-run dynamics of volume and volatility. In this paper, we propose a dynamic extension of the MDH that specifies the impact of information arrival on market characteristics in the context of liquidity frictions. We distinguish between short-term and long-term liquidity frictions. Our results highlight the economic value and statistical accuracy of our specification. First, based on some goodness of fit tests, we show that our dynamic two-latent factor model outperforms all competing specifications. Second, the information flows latent variable can be used to propose a new momentum strategy. We show that this signal improves once we allow for a second signal - the liquidity frictions latent variable - as the momentum strategies based on our model present better performance than the strategies based on competing models

Le Fol G., Méhouas B. (2016), Liquidité et risque de liquidité, RB. Revue banque, Juillet, SP, p. 42-46

La liquidité des marchés financiers est devenue une préoccupation majeure qui a longtemps été ignorée aussi bien par la théorie financière classique que dans la pratique. Ainsi, investir sur les marchés, c'était gérer le fameux couple rendement-risque.

Darolles S., Dudek J., Le Fol G. (2016), Gauging Liquidity Risk in Emerging Market Bond Index Funds, Annals of Economics and Statistics, 123/124, p. 247-269

ETFs and index funds have grown at very rapid rates in recent years. Originally launched totrack some large liquid indices in developed markets, they now also concern less liquid assetclasses such as emerging market bonds. Illiquidity certainly affects the quality of the replication,and in particular, liquidity might increase the tracking error of any index fund, i.e., thedifference between the fund and the benchmark returns. The tracking error is then the firstcharacteristic that investors consider when they select index funds. In this paper, we beginfrom the CDS-bond basis to simulate the tracking error (TE) of a hypothetical well-diversifiedfund investing in the emerging market bond universe. We compute the CDS-bond basis andthe tracking error for 9 emerging market sovereign entities: Brazil, Chile, Hungary, Mexico,Poland, Russia, South Africa, Thailand and Turkey. All of these countries are included inthe MSCI Emerging Market Debt in Local Currency index. Our sample period ranges fromJanuary 1, 2007 to March 26, 2012. Using a Regime Switching for Dynamic Correlations(RSDC) model, we show that the country-by-country tracking error is reduced by the diversificationat the fund level. Moreover, we show that this diversification effect is less effectiveduring crisis periods. This loss of diversification benefits is the main risk of index funds when they are designed to create a liquid exposure to illiquid asset classes

Darolles S., Francq C., Le Fol G., Zakoïan J-M. (2016), Intrinsic Liquidity in Conditional Volatility Models, Annals of Economics and Statistics, 123/124, p. 225-245

Until recently the liquidity of financial assets has typically beenviewed as a second-order consideration. Liquidity was frequently associatedwith simple transaction costs that impose - temporary if any- effect on assetprices, and whose shocks could be easily diversified away. Yet the evidenceespeciallythe recent liquidity crisis- suggests that liquidity is now a primaryconcern. This paper aims at disentangling market risk and liquidity riskin the context of conditional volatility models. Our approach allows theisolation of the intrisic liquidity of any asset, and thus makes it possible todeduce a liquidity risk even when volumes are not observed.

Darolles S., Le Fol G., Mero G. (2015), Measuring the Liquidity Part of Volume, Journal of Banking and Finance, 50, p. 92–105

Based on the concept that the presence of liquidity frictions can increase the daily traded volume, we develop an extended version of the mixture of distribution hypothesis model (MDH) along the lines of Tauchen and Pitts (1983) to measure the liquidity portion of volume. Our approach relies on a structural definition of liquidity frictions arising from the theoretical framework of Grossman and Miller (1988), which explains how liquidity shocks affect the way in which information is incorporated into daily trading characteristics. In addition, we propose an econometric setup exploiting the volatility-volume relationship to filter the liquidity portion of volume and infer the presence of liquidity frictions using daily data. Finally, based on FTSE 100 stocks, we show that the extended MDH model proposed here outperforms that of Andersen (1996) and that the liquidity frictions are priced in the cross-section of stock returns.

Darolles S., Le Fol G. (2014), Trading volume and Arbitrage, GSTF : Journal on Business Review, 3, 3, p. 30-39

Decomposing returns into market and stock specific components is common practice and forms the basis of popular asset pricing models. What about volume? Can volume be decomposed in the same way as returns? Lo and Wang (2000) suggest such a decomposition. Our paper contributes to this literature in two different ways. First, we provide a model to explain why volumes deviate from the benchmark. Our interpretation is in terms of arbitrage strategies and liquidity. Second, we propose a new efficient screening tool that allows practitioners to extract specific information from volume time series. We provide an empirical illustration of the relevance and the possible uses of our approach on daily data from the FTSE index from 2000 to 2002.

Bialkowski J., Darolles S., Le Fol G. (2012), Reducing the risk of VWAP orders execution - A new approach to modeling intra-day volume, JASSA, 1, p. 12-18

This paper proposes a new dynamic approach to modelling intra-day trading volume based on factor models. It assumes that intra-day volume can be decomposed into two parts each predicted using separate time-series models. By enabling more accurate prediction of intra-day volume, this methodology allows for a significant reduction in the cost of executing Volume weighted Average Price orders.

Bialkowski J., Darolles S., Le Fol G. (2012), How to reduce the risk of VWAP orders execution ?, JASSA, 1

This paper proposes a new dynamic approach to modelling intra-day trading volume based on factor models. It assumes that intra-day volume can be decomposed into two parts each predicted using separate time-series models. By enabling more accurate prediction of intra-day volume, this methodology allows for a significant reduction in the cost of executing Volume Weighted Average Price orders.

Le Fol G. (2011), A propos du trading haute fréquence, Analyse financière, 41, p. 57-59

Quasiment inexistant au début des années 2000, le trading algorithmique représente 72 % des échanges sur actions aux États-Unis, 35 % en Europe, et continue son expansion vers d'autres marchés. Alors que ses promoteurs et ses détracteurs font valoir leurs arguments, les régulateurs et les gouvernements se saisissent de la question.

Jardet C., Le Fol G. (2010), Euro money market interest rate dynamics and volatility: how they respond to recent changes in the operational framework, International Journal of Finance and Economics, 15, 4, p. 316-330

En mars 2004, l'Eurosystème a mis en place différentes modifications de son cadre opérationnel et de sa gestion de la liquidité. L'objectif de cet article est d'étudier les effets de ces changements sur le niveau et la volatilité de l'écart entre l'Eonia et le taux de soumission minimum. Nos résultats montrent que ces changements ont globalement eu un effet positif sur le niveau et la volatilité du spread. La baisse de la volatilité observée après 2004 est largement expliquée par ces modifications.

At the beginning of 2004, the Eurosystem implemented several modifications of its operational framework and liquidity management aiming at enhancing market efficiency. The purpose of this article is to study the effects of theses changes in the spread between the Eonia and the minimum bid rate. Our results reflect that both the operational changes as well as the new liquidity management are responsible for a significant decrease in the interest rate volatility.

Le Fol G., Jardet C., Idier J. (2009), How liquid are markets: an Application to Stock Markets, Bankers, Markets & Investors, 103, p. 50-58

The article discusses financial market liquidity and its applications to the stock market. It says market liquidity has a time attribute in which investors needs the shortest possible trade time to prevent price reversal risk, has volume in which there must be enough bids to satisfy the needs of investors, and has price, in which assets should have a fair value. Moreover, market liquidity measures have several indicators including immediacy, depth, and tightness.

Idier J., Jardet C., Le Fol G., Monfort A., Pegoraro F. (2008), Taking into account extreme events in European option pricing, Financial Stability Review, 12, p. 39-51

According to traditional option pricing models, financial markets underestimate the impact of tail risk. In this article, we put forward a European option pricing model based on a set of assumptions that ensure, inter alia, that extreme events are better taken into account. Using simulations, we compare the option prices obtained from the standard Black and Scholes model with those resulting from our model. We show that the traditional model leads to an overvaluation of at-the-money options, which are the most traded options, while the less liquid in-the-money and out-of-the-money options are undervalued.

Bialkowski J., Darolles S., Le Fol G. (2008), Improving VWAP strategies: A dynamic volume approach, Journal of Banking and Finance, 32, 9, p. 1709-1722

In this paper, we present a new methodology for modelling intraday volume, which allows for a reduction of the execution risk in VWAP (Volume Weighted Average Price) orders. The results are obtained for all the stocks included in the CAC40 index at the beginning of September 2004. The idea of considered models is based on the decomposition of traded volume into two parts: one reflects volume changes due to market evolution; the second describes the stock specific volume pattern. The dynamic of the specific volume part is depicted by ARMA and SETAR models. The implementation of VWAP strategies allows some dynamic adjustments during the day in order to improve tracking of the end-of-day VWAP.

Lehtonen E., Foldes S., Couceiro M. (2006), Composition of Post classes and normal forms of Boolean functions, Discrete Mathematics, 306, 24, p. 3223-3243

The classcompositionC?K of Boolean clones, being the set of composite functionsf(g1,...,gn) with f?C, g1,...,gn?K, is investigated. This compositionC?K is either the join C?K in the Post Lattice or it is not a clone, and all pairs of clones C,K are classified accordingly. Factorizations of the clone ? of all Booleanfunctions as a composition of minimal clones are described and seen to correspond to normalform representations of Booleanfunctions. The median normalform, arising from the factorization of ? with the clone SM of self-dual monotone functions as the leftmost composition factor, is compared in terms of complexity with the well-known DNF, CNF, and Zhegalkin (Reed-Muller) polynomial representations, and it is shown to provide a more efficient normalform representation.

Darolles S., Le Fol G. (2004), Nouvelles techniques de gestion et leur impact sur la volatilité, Revue d'économie financière, 74, p. 231-243

La gestion alternative s'est considérablement développée ces dernières années. Cependant l'impact sur les marchés et plus précisément sur la volatilité des marchés des nouvelles techniques de gestion qui l'accompagne est méconnu. Cet article se propose d'explorer le lien entre le développement de nouvelles pratiques de gestion et l'évolution de la volatilité, dont l'étape intermédiaire est l'étude du lien entre pratiques de gestion et volume.

New investment management techniques and their impact on volatility The growth of alternative investment has been considerable in recent years. However, the impact on markets or more precisely, on markets volatility, of the new induced management techniques is still not clear. In this article, we undergo such an analysis. We first link investment strategies to volume before analysing the volume-volatility relation.

Darolles S., Gouriéroux C., Le Fol G. (2000), Intraday Transaction Price Dynamics, Annales d'Economie et de Statistique, 60, p. 207-238

Les prix de transaction intrajournaliers présentent deuxcaractéristiques majeures : ils sont discrets en niveau et n'existent qu'à desdates de transaction aléatoires. Nous proposons une modélisation de ladynamique des prix de transaction prenant en compte ces deux aspects.Nous modélisons le processus de prix à l'aide d'une chaîne de Markov etintroduisons différents outils adaptés à l'étude de la dynamique, comme ladécomposition canonique, les mesures d'échelle et de vitesse. Cetteapproche est utilisée pour étudier les cours de transaction de l'action ElfAquitaine échangée à la Bourse de Paris.

High frequency transaction prices exhibit two major characteristics: they are discrete in level and only exist at random transactiondates. In this paper, we seek to model transaction price dynamics, takinginto account these two features. We specify the transaction price processas a Markov Chain with random transaction dates, and discuss varioustools for dynamic analysis like the canonical decomposition, the scale andspeed measures. The approach is applied to high frequency data on thestock Elf-Aquitaine traded on the Paris Bourse.

Gouriéroux C., Jasiak J., Le Fol G. (1999), Intra-day market activity, Journal of Financial Markets, 2, 3, p. 193-226

This paper presents a study of intra-day patterns of stock market activity and introduces duration based activity measures for single stocks and multiple assets. The proposed measures involve weighted durations, i.e. times necessary to sell (buy) a predetermined volume or value of stocks. As such, they capture dependencies between intra-trade durations, transaction volumes and prices, and can be interpreted as liquidity measures. This approach allows us to highlight the intra-day variations of liquidity, its costs and volatility, and to develop a liquidity based asset ordering. The extension to a multivariate analysis yields new insights into the dynamics of portfolio liquidity by revealing various aspects of asset substitution, including the effects of correlated trade intensities of portfolio components. Several examples are used to show that in practice, the proposed liquidity measures become efficient instruments for strategic block trading and optimal portfolio adjustments. The paper also contains an empirical study of asset activity on the Paris Bourse. We examine the liquidity dynamics throughout the day and reveal the existence of periodic patterns resulting from world-wide interactions of major stock markets. In the multivariate setup, we report evidence on common patterns and correlations of trade intensities of selected stocks.

Gouriéroux C., Le Fol G. (1998), The Effect of Matching Procedures on Trades, Revue économique, 49, 3, p. 795-808

Les systèmes de négociation utilisés sur les marchés financiers varient en termes de procédures d'appariement, de normes de rédaction des contrats, de présence d'intermédiaires ou non pour assurer la liquidité, de transparence des marchés ... Nous nous intéressons dans cet article à l'effet direct sur les caractéristiques de marché d'une modification de la procédure d'appariement, c'est-à-dire de la fréquence d'échange et du choix de prix uniques ou multiples pour les contrats signés à une même date.

The trading systems used on financial markets differ in terms of matching procedures, selected norms to write contracts, existence or not of intermediaries to ensure liquidity, market transparency... We are interested in measuring the direct effect on market specifics of a matching procedure modification namely, the matching frequency and the choice of a unique or multiple prices for the contracts concluded simultaneously.

Le Fol G., Mercier L. (1998), Time Deformation: Definition and Comparisons, Journal of Computational Intelligence in Finance, 6, 5, p. 19-33

In this paper, we are dealing with financial high frequency data; any time an order reaches the market, any time a cancellation or transaction occurs, a new record is made, ending up with a huge amount of data. Hence the time interval between two events is not fixed, forbidding the use of standard statistical tools. In the recent literature, several authors proposed time deformation techniques to deal with this problem. The practical importance of time deformation is to give a preprocessing technique to obtain a regularly spaced grid of data. The main contribution of this paper is to survey most of the time deformations proposed in the literature in a general setting and to compare them from both a statistical and financial point of view. We provide a new trading strategy in which the time to invest is endogeneous. Moreover, we highlight the fact that changing time scale can improve the daily gain following such a strategy.

Gouriéroux C., Le Fol G. (1997), Volatilités et mesures du risque, Journal de la société statistique de Paris, 138, 4, p. 7-32.

Nous discutons la pertinence de mesurer le risque par les volatilités. Nous appuyant sur les études récentes sur données de cotation et sur la spécificité des produits dérivés, nous proposons des mesures complémentaires de façon à traiter les effets volumes et temps, et à tenir compte des asymétries.

We discuss the relevance of the volatility as a risk measure. By considering recent studies on tick by tick data and specific features of derivatives, we introduce alternative measures to take into account the time and volume effects, or the distributional asymmetry.

Ouvrages

Gouriéroux C., Le Fol G. (1997), Modes de négociation et caractéristiques de marché, Paris?, CEPREMAP, 38 p. p.

Chapitres d'ouvrage

Darolles S., Dudek J., Le Fol G. (2014), Contagion in Emerging Markets, in Finch N. (eds), Emerging Markets and Sovereign Risk, Basingstoke (Publishing Building, Brunel Road, Houndmills, Basingstoke, Hampshire RG21 6XS), Palgrave Macmillan, p. XVI-298

Communications

Darolles S., Le Fol G. (2014), Trading Volume and Arbitrage,, THAILAND

Decomposing returns into market and stock specific components is common practice and forms the basis of popular asset pricing models. What about volume? Can volume be decomposed in the same way as returns? Lo and Wang (2000) suggest such a decomposition. Our paper contributes to this literature in two different ways. First, we provide a model to explain why volumes deviate from the benchmark. Our interpretation is in terms of arbitrage strategies and liquidity. Second, we propose a new efficient screening tool that allows practitioners to extract specific information from volume time series. We provide an empirical illustration of the relevance and the possible uses of our approach on daily data from the FTSE index from 2000 to 2002.

Darolles S., Dudek J., Le Fol G. (2014), Liquidity risk and contagion for liquid funds, 31st International French Finance Association Conference, AFFI 2014, Aix-en-Provence, FRANCE

Fund managers face liquidity problems but they have to distinguish the market liquidity risk implied by their assets and the funding liquidity risk. This latter is due to both the liquidity mismatch between assets and liabilities and the redemption risk due to the possible outflows from clients. The main contribution of this paper is the analysis of contagion looking at common market liquidity problems to detect funding liquidity problems. Using the CDS Bond Spread basis as a liquidity indicator and a state space model with time-varying volatility specification, we show that during the 2007-2008 financial crisis, there exist pure contagion effects both in terms of price and liquidity on the emerging sovereign debt market. This result has strong implication since the main risk for an asset manager is to get stuck with an unwanted position due to a dry-up of market liquidity.

Darolles S., Dudek J., Le Fol G. (2013), Liquidity Contagion. The Emerging Sovereign Debt Markets example, 30th International French Finance Association Conference, Lyon, FRANCE

Financial markets are today so interconnected that they are fragile to contagion. Massive investment funds with very short horizons in -and out- flows can generate contagion effects between markets. Since 2010, investors are willing to get a liquid exposure to the EMsovereign debt. As a consequence, some asset management firms started to propose products to track the performance of this asset class. However in that case, the fund manager faces a mismatch of liquidity between assets and liabilities and needs some tools to manage the liquidity of his investments. The main contribution of this paper is the analysis of contagion looking at common market liquidity problems to detect funding liquidity problems. Using the CDS Bond Spread basis as a liquidity indicator and a state space model with time-varying volatility specification, we show that during the 2007-2008 financial crisis, there exist pure contagion effects both in terms of price and liquidity on the emergings overeign debt market.This result has strong implication since the main risk for an asset manager is to get stuck with an unwanted position due to a dry-up of market liquidity.

Darolles S., Dudek J., Le Fol G. (2012), MLiq a meta liquidity measure, Computational and Financial Econometrics (CFE'12), Oviedo, SPAIN

The last crisis sheds light on the importance to consider liquidity risk in the financial industry. Indeed, liquidity had a predominant role in propagating the turmoil. In contrast, controlling for liquidity is a difficult task. The definition of liquidity links different dimensions that are impossible to fully capture together. As a consequence, there exist a lot of liquidity measures and we find in the literature some solutions to take into account more than one dimension of liquidity but also liquidity measures considering a long lasting liquidity problem. In this paper, we focus on drastic illiquidity events, i.e liquidity problems reported by several liquidity measures simultaneously. We propose a Meta-Measure of liquidity called MLiq and defined as the probability to be in a state of high liquidity risk. We use a multivariate model allowing to measure correlations between liquidity measures jointly with a state-space model that endogenously defines the illiquid periods.

Darolles S., Dudek J., Le Fol G. (2012), Liquidity Contagion. The Emerging Sovereign Debt Markets example, European Economic Association & Econometric Society, Malaga, SPAIN

Emerging economies have passed an important stress test during the period 2008-09 and are now the key drivers for global growth of the world economy. Financial markets are today so interconnected that they are fragile to contagion. The issue of financial contagion was historically concerning Emerging Markets (EM). These latter attract foreign investors and massive investments funds in -and out- flows on very short horizons can be a source of contagion effects between markets. The analysis of the sovereign debt markets and particularly related CDS markets is of interest since it is at the very center of a new phenomenon: banks are not anymore the main source of systemic risk but sovereign economies are. As foreign investors represent the most of the volume traded, capital flows in these markets should also impact FX market. Their analysis is thus also central to this study. Indeed, the main risk for an asset manager is to get stuck with unwanted sovereign debt due to a dry up of market liquidity. The main contribution of this paper is the analysis of contagion looking at common markets liquidity problems to detect funding liquidity problems. We use the Credit Default Swap bond spread basis and the deviations from the Covered Interest Parity as liquidity measures respectively for sovereign debt and FX markets. Moreover, we distinguish interdependence and pure contagion using a state-space model with a time-varying volatility specification and we apply it to both returns and liquidity indicators.

Darolles S., Le Fol G., Mero G. (2011), Tracking Illiquidities in Intradaily and Daily Characteristics, 28th annual International Conference of the French Finance Association, Montpellier, France

In this article, we distinguish between two types of liquidity problems called respectively liquidity frictions and illiquidity events. The first one is related to order imbalances that are resorbed within the trading day. It can be assimilated to "immediacy cost" and impacts the traded volume at the intraday and daily frequencies while affecting the price increments only at the intraday periodicity. The second one is inherent to the long lasting liquidity problems and is responsible for the time-dependence of the daily returns. We extend the MDHL framework of Darolles et al. (2010) to account for the presence of the illiquidity events. We then propose a two-step signal extraction formulation of the MDHL model in order to separate the two liquidity problem impacts on the daily returns and volume. We also provide, for a set of FTSE100 individual stocks, long lasting illiquidity indicators.

Darolles S., Le Fol G., Mero G. (2011), When Market Illiquidity Generates Volume, First Meeting of the ANR Econom&Risk (Econometric Approaches for Risk Modeling), Orléans, FRANCE

We develop a model of the daily return-volume relationship which incorporates information and liquidity shocks. First, we distinguish between two trading strategies, information-based and liquidity-based trading and suggest that their respective impacts on returns and volume should be modeled differently. Second, we integrate the microstructure setting of Grossman-Miller (1988) with the information flow perspective of Tauchen-Pitts (1983) and derive a modified MDH model with two latent factors related to information and liquidity. Our model explains how the liquidity frictions can increase the daily traded volume, in the presence of liquidity arbitragers. Finally, we propose a stock-specific liquidity measure using daily return and volume observations of FTSE100 stocks.

Foldes S., Lehtonen E., Couceiro M. (2005), On the complexity of representing sets of vertices in the n-cube, International Conference of Numerical Analysis and Applied Mathematics (ICNAAM 2005), Rhodes, Grèce

Representations of an arbitrary set of vertices of an n-dimensional cube in terms of convex sets are compared with respect to their complexity. The notion of complexity used in the representations is based on the union, symmetric difference and ternary median operations. Convexity of a set of vertices refers to Hamming distance or, equivalently, to the intersection of cubes with supporting hyperplanes.

Foldes S., Lehtonen E., Couceiro M. (2004), On compositions of clones of Boolean functions, International Conference of Computational Methods in Sciences and Engineering 2004 (ICCMSE 2004), Attica, Grèce

We present some compositions of clones of Boolean functions that imply factorizations of ?, the clone of all Boolean functions, into minimal clones. These can be interpreted as representation theorems, providing representations of Boolean functions analogous to the disjunctive normal form, the conjunctive normal form, and the Zhegalkin polynomial representations.

Documents de travail

Le Fol G., Idier J., Borgy V. (2010), Liquidity Problems in the FX Liquid Market, Document de travail Banque de France, Paris, Banque de France, 40

Même si le marché des changes est l'un des marchés financiers les plus liquides, ce serait une erreur de le considérer exempt de tout problème de liquidité. Ce papier analyse, en long échantillon (2000- 2009), l'ensemble des cotations et transactions sur trois couples de devises (EURJPY, EURUSD, USDJPY) passées sur la plateforme d'échange EBS. Afin de caractériser la liquidité du marché des changes, nous considérons les fourchettes de cotations, le volume échangé, le nombre de transactions et la statistique d'Amihud (2002) d'illiquidité. Nous proposons également le calcul d'un nouvel indicateur de liquidité, BIL, qui ne repose que sur la disponibilité des prix de transactions. Les principaux avantages de cette mesure sont d'être facilement calculable quel que soit le marché et d'avoir une interprétation claire en termes de coûts de la liquidité. En utilisant l'ensemble de ces analyses avancées de la liquidité, nous testons finalement la capacité de ces mesures à détecter les problèmes de liquidité sur le marché des changes. Notre analyse, basée sur une approche du signal, montre que les problèmes de liquidité sur le marché des changes se sont produits de façon spécifique au début des années 2000, et plus généralement lors de la récente crise financière.

Even though the FX market is one of the most liquid financial market, it would be an error to consider that it is immune against any liquidity problem. This paper analyzes on a long sample (2000-2009), the all set of quotes and transactions in three main currency pairs (EURJPY, EURUSD, USDJPY) on the EBS platform. To characterize the FX market liquidity, we consider the spread, the traded volume, the number of transactions and the Amihud (2002) statistic for illiquidity. We also propose the computation of a new liquidity indicator, BIL, that solely relies on price series availability. The main benefit of such measure is to be easily calculated on almost any financial market as well as to have a clear interpretation in terms of liquidity costs. Using all these advanced liquidity analyses, we finally test the accuracy of these measures to detect liquidity problems in the FX market. Our analysis, based on a signaling approach, shows that liquidity problems have arisen during specific episodes in the early 2000's and more generally during the recent financial turmoil.

Autres publications

Bialkowski J., Darolles S., Le Fol G., (2012), Reducing the risk of VWAP orders execution - A new approach to modeling intra -day volume, JASSA The Finsia Journal of Applied Finance, 1, pp. 12- 18

Darolles, S ; Le Fol, G . Trading volume and Arbitrage. GSTF : Journal on Business Review. Volume 3. n° 3. 2014. pages 30-39

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