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Original Articles

Predicting a flash crash in the yen/dollar foreign exchange market

Pages 987-990 | Published online: 26 Oct 2016
 

ABSTRACT

I examine whether the volume-synchronized probability of informed trading (VPIN) can predict a flash crash in the yen/dollar foreign exchange market. The results show that VPIN using bulk volume classification predicted a recent event. However, VPIN using order flows, which are the amount of the ask-side transaction minus those of bid-side, does not.

JEL CLASSIFICATION:

Acknowledgement

This work is supported by JSPS KAKENHI Grant Number 15K03558 and a grant-in-aid from the Zengin Foundation for Studies on Economics and Finance.

Disclosure statement

No potential conflict of interest was reported by the author.

Notes

1 I also consider 1/20 of median of daily trading volume, and the main result remains unchanged.

Additional information

Funding

This work is supported by JSPS KAKENHI Grant Number 15K03558 and a grant-in-aid from the Zengin Foundation for Studies on Economics and Finance.

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