Auction-based tests of inventory control and private information in a centralized interdealer FX market

JOURNAL OF FINANCIAL MARKETS
DOI: 
https://doi.org/10.1016/j.finmar.2025.100981
Published: 
Authors:
Jean Pietro Bonaldi-Varóne,
Mauricio Villamizar-Villegasa
Classification JEL: 
D44, F31, G15
Download document

The most recent

Regional Unconditional Transfers: The Case of Riverside Regions in a Developing Country
Bernardo Romero-Torres, Gerson Javier Pérez-Valbuena, Andrés Felipe García-Suaza, Jaime Alfredo Bonet-Moron
Fiscal Impact of Demographic Change on Education in Colombia
Olga Lucia Acosta Navarro, Andrés Felipe Chitán-Caes, Ana María Iregui-Bohórquez, Ligia Alba Melo-Becerra, María Teresa Ramírez-Giraldo, Jorge Leonardo Rodríguez Arenas
The Effectiveness of Natural Resources Funds: Evidence from Colombia
Alejandro Ome, Laura Giles Álvarez, Gerson Javier Pérez-Valbuena, Cristhian Larrahondo

This study examines how inventory control and private information affect trading prices and volumes in a centralized interdealer foreign exchange (FX) market. Using exogenous variation from FX auctions conducted by the Colombian Central Bank (2008–2014), we analyze settlement data from the COP/USD spot market before and after each auction. Comparing dealers with differing inventory and information shocks, we find that those with reduced inventories increase net USD purchases and pay higher prices post-auction.