The Euro as an International Currency: explaining puzzling first evidence from the foreign exchange markets

This paper presents evidence that the bid-ask spreads in euro rates increased relative to the corresponding bid-ask spreads in the German mark (DM) prior to the creation of the currency union. This comes with a decrease in transaction volume in the euro rates relative to the previous DM rates. The starkest example is the DM(euro)/yen rate in which the spread has risen by almost two-thirds while the volume decreased by more than one third. This outcome is surprising because the common currency concentrated market liquidity in fewer external euro rates and higher volume tends to be associated with lower spreads. We propose a microstructure explanation based on a change in the information environment of the FX market. The elimination of many cross currency pairs increased the market transparency for order flow imbalances in the dealership market. It is argued that higher market transparency adversely affects the inventory risk sharing efficiency of the dealership market and induces the observed euro spread increase and transaction volume shortfall.

International order flows: Explaining equity and exchange rate returns

Macroeconomic models of equity and exchange rate returns perform poorly at high frequencies. The proportion of daily returns that these models explain is essentially zero. Instead of relying on macroeconomic determinants, we model equity price and exchange rate behavior based on a concept from microstructure – order flow. The international order flows are derived from belief changes of different investor groups in a two-country setting. We obtain a structural relationship between equity returns, exchange rate returns and their relationship to home and foreign equity market order flow. To test the model we construct daily aggregate order flow data from 800 million equity trades in the U.S. and France from 1999 to 2003. Almost 60% of the daily returns in the S&P100 index are explained jointly by exchange rate returns and aggregate order flows in both markets. As predicted by the model, daily exchange rate returns and order flow into the French market have significant incremental explanatory power for the daily S&P returns. The model implications are also validated for intraday returns.

Charge exchange emission from solar wind helium ions

Charge exchange X-ray and far-ultraviolet (FUV) aurorae can provide detailed insight into the interaction between solar system plasmas. Using the two complementary experimental techniques of photon emission spectroscopy and translation energy spectroscopy, we have studied state-selective charge exchange in collisions between fully ionized helium and target gasses characteristic of cometary and planetary atmospheres (H2O, CO2, CO, and CH4). The experiments were performed at velocities typical for the solar wind (200-1500 km s(-1)). Data sets are produced that can be used for modeling the interaction of solar wind alpha particles with cometary and planetary atmospheres. These data sets are used to demonstrate the diagnostic potential of helium line emission. Existing Extreme Ultraviolet Explorer (EUVE) observations of comets Hyakutake and Hale-Bopp are analyzed in terms of solar wind and coma characteristics. The case of Hale-Bopp illustrates well the dependence of the helium line emission to the collision velocity. For Hale-Bopp, our model requires low velocities in the interaction zone. We interpret this as the effect of severe post-bow shock cooling in this extraordinary large comet.

Charge exchange and dissociative processes in collisions of slow He2+ ions with H2O molecules

Experimental and theoretical studies of one-electron capture in collisions of He2+ ions with H2O molecules have been carried out in the range 0.025-12 keV amu(-1) corresponding to typical solar wind velocities of 70-1523 km s(-1). Translational energy spectroscopy (TES), photon emission spectroscopy (PES), and fragment ion spectroscopy were employed to identify and quantify the collision mechanisms involved. Cross sections for selective single electron capture into n=1, 2, and 3 states of the He+ ion were obtained using TES while PES provided cross sections for capture into the He+(2p) and He+(3p) states. Our model calculations show that He+(n=2) and He+(n=3) formation proceeds via a single-electron process governed by the nucleus-electron interaction. In contrast, the He+(1s) formation mechanism involves an exothermic two-electron process driven by the electron-electron interaction, where the potential energy released by the electron capture is used to remove a second electron thereby resulting in fragmentation of the H2O molecule. This process is found to become increasingly important as the collision energy decreases. The experimental cross sections are found to be in reasonable agreement with cross sections calculated using the Demkov and Landau-Zener models.

Dissociative charge exchange and ionization of O-2 by fast H+ and O+ ions: Energetic ion interactions in Europa's oxygen atmosphere and neutral torus

Measurements of electron capture and ionization of O-2 molecules in collisions with H+ and O+ ions have been made over an energy range 10 - 100 keV. Cross sections for dissociative and nondissociative interactions have been separately determined using coincidence techniques. Nondissociative channels leading to O-2(+) product formation are shown to be dominant for both the H+ and the O+ projectiles in the capture collisions and only for the H+ projectiles in the ionization collisions. Dissociative channels are dominant for ionizing collisions involving O+ projectiles. The energy distributions of the O+ fragment products from collisions involving H+ and O+ have also been measured for the first time using time-of-flight methods, and the results are compared with those from other related studies. These measurements have been used to describe the interaction of the energetic ions trapped in Jupiter's magnetosphere with the very thin oxygen atmosphere of the icy satellite Europa. It is shown that the ionization of oxygen molecules is dominated by charge exchange plus ion impact ionization processes rather than photoionization. In addition, dissociation is predominately induced through excitation of electrons into high-lying repulsive energy states ( electronically) rather than arising from momentum transfer from knock-on collisions between colliding nuclei, which are the only processes included in current models. Future modeling will need to include both these processes.