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## 统计代写|风险建模代写Financial risk modeling代考|Activities during a day

The intraday patterns of foreign exchange transaction are anecdotally and instinctively known to bank dealers. However, only a few academic papers have statistically examined market activities so far. Ito and Hashimoto $(2004,2006)$ were one of the first teams to analyze the foreign exchange market using tick-by-tick deal data.

Following Ito and Hashimoto (2006), this section examines highfrequency data on foreign exchange market activities such as the “number of quotes,” the “number of deals,” “bid-ask spread” and the “relative volume share” in order to show the intraday patterns of the foreign exchange market. The sample period is from 1999 to 2001 . The number of quotes is calculated as the number of seconds where quotes are recorded, and the number of deals is the sum of bid-side deals and askside deals in each hour of the day. 12 The “relative volume” is defined as

hourly aggregated relative volumes: the percentage share of transaction volume in one minute relative to the total transaction volume in one day. The hourly transaction volumes, with each contract (transaction) being one million of the “base currency” (the first currency in the currency pair name), are divided by the total trading volume of the day. ${ }^{13}$ These indicators of market activities are calculated for one hour and then averaged over three years with a differentiation of the standard and daylight saving time. 14

Figure $3.2$ shows the intraday (Hour $0-23$ ) patterns of the numbers of deals, quotes and the bid-ask spread of the USDJPY and Figure $3.3$ shows those of the EURUSD. 15

## 统计代写|风险建模代写Financial risk modeling代考|Regional contribution

The above analysis based on counts of deals and quotes reveals that the transaction activities become exceptionally high during the overlapping business hours of the currency pair home markets – the Tokyo afternoon and London morning (the second peak) and the London afternoon and the US morning (the third peak). The next question is on the regional contribution to the surge in activities. For example, whether a surge in activities in the Tokyo mid-afternoon hours and London morning hours can be attributed to the activity of Tokyo participants or London participants. In the following section, we decompose the regional contributions to the activity surge by the relative trading volume shares which have the label of participants (regional names).

The regional contributions to the surge in trades for dollar/yen activities are shown in Figure $3.4$ and for euro/dollar in Figure $3.5^{17}$ The dollar/yen trades during the overlapping hours of the Tokyo afternoon and London morning are done by Tokyo (and Asian) participants (financial institutions in Japan and Asia region) and London (and European) participants (financial institutions in Europe) around GMT Hours 6-8,

with the majority of Tokyo participants at the beginning and then with the increasing share of London participants. During this time period, transactions from New York (the United States) participants (financial institutions in North America) are quite small and almost negligible. On the other hand, the dollar/yen trades during the overlapping hours of the London afternoon and the New York morning are mainly done by London and New York participants with some Tokyo participants.

The figures also reveal that transactions by Tokyo participants and London participants exhibit a U-shape pattern, whereas the transactions by New York participants have a single-peak pattern. The monotonic decline in market activities, the number of deals and quotes, after the New York afternoon may be due to two reasons: there is no pickup effect in the New York afternoon (unlike the Tokyo or London markets) and the transactions after GMT 16 are mainly done by the New York participants (almost no participants from Tokyo and London). The very large trade volume among the Tokyo participants during the Tokyo business hours (except for lunch hours) implies that, for the dollar/yen trade, the Tokyo market has new information, inducing heterogeneous reactions to the news, thereby generating more trade.

## 统计代写|风险建模代写Financial risk modeling代考|Market opening hours

As seen in the analysis above, each market experiences a surge in transactions during the opening hours. When there are many participants in the market (the market is “deep”), trading volume tends to be higher and spreads tend to be narrower. The opening hour of the Tokyo market appears to have special characteristics because it follows a few hours of extremely low activity after the New York market closes. In particular, the Monday morning of the Tokyo market probably has some specific activity patterns because the Tokyo market is the first to open after a long weekend break, from Friday night to Monday morning. The first hour of Tokyo on Monday (Hour 0 in adjusted GMT) may be different because the volume of orders accumulated during the weekend (about 35 hours) is much larger than those accumulated during the overnight gap (2-3 hours between the New York close and Tokyo opening) resulting in much higher activity compared to the same hour on any other day of the week. Similarly, we expect the opening hours of the London and New York markets to show some special characteristics in trading activity.

Ito and Hashimoto (2006) examined the opening-hour effect of the three markets (Tokyo, London and New York), the Monday morning effect and the (lack of) U-shape pattern by testing the significance of dummy variables that take the value 1 when deals/quotes are recorded in the opening hours (or Monday opening hours). They found that, in general, the negative relationship between the number of deals (quotes) and the spread holds even for these opening hours. That is, when the market is deep (when the number of price [quotes] changes is large) the bid-ask spread tends to be narrower.

The Tokyo opening effect and Tokyo Monday opening effect are tested by examining the relationship between the spread and the number of deals/quotes with opening-hour dummies. 18 For the Tokyo opening effect in 1999 , it turns out that the spread becomes narrower as the number of deals/quotes increases during the opening hour, 9 am Tokyo time, for both the dollar/yen trade and the euro/dollar trade. On the other hand, as for the Monday opening effect, it is found that the number of deals significantly increases during the Monday opening hours for the dollar/yen trade in 1999 and 2000 , suggesting that the market participants carry out some orders accumulated over the weekend in the first hour of the week, the Monday Tokyo morning at GMT Hour 0 , despite the relatively wide bid-ask spread. The Monday Tokyo effect is not found for the euro/dollar trade.

## 统计代写|风险建模代写Financial risk modeling代考|Market opening hours

Ito 和 Hashimoto（2006 年）通过检验取值的虚拟变量的显着性，检验了三个市场（东京、伦敦和纽约）的开市时间效应、周一早上效应和（缺乏）U 形模式1 当交易/报价记录在营业时间（或周一营业时间）时。他们发现，一般来说，交易数量（报价）与价差之间的负相关关系即使在这些开放时间也成立。也就是说，当市场深度时（当价格 [报价] 变化的数量很大时），买卖差价往往会更窄。