Competitive Entry and Endogenous Risk in the Foreign Exchange Market
构建了一个交易者异质性预期误差下的动态进入模型，分析交易者参与如何影响汇率波动，发现竞争性进入导致过度进入和价格过度波动，对进入者征税可降低参与和波动并提升效率。
Recent evidence shows that higher trader participation increases exchange rate volatility. To explore this linkage, we develop a dynamic model of endogenous entry of traders subject to heterogenous expectational errors. Entry of a marginal trader into the market has two effects: it increases the capacity of the market to absorb exogenous supply risk, and at the same time it adds noise and endogenous trading risk. The competitive entry equilibrium is characterized by excessive market entry and excessively volatile prices. A positive tax on entrants can decrease trader participation and volatility while increasing market efficiency.