Arbeitspapier
The pricing of FX forward contracts: Micro evidence from banks' dollar hedging
Using transaction-level data on foreign exchange (FX) forward contracts, we document large demand-driven heterogeneity in banks' dollar hedging costs. For identification, we exploit regulatory end-of-quarter reporting that penalizes banks' currency exposure with capital surcharges. Contracts that reduce quarter-end currency exposure trade at higher prices, specifically for banks with high dollar funding gaps and high leverage, while access to internal dollar capital markets and bargaining power reduces prices. Spreads between similar contracts with and without initial margin widen with leverage. Our results suggest that banks' shadow costs of capital are important for the international propagation of shocks through FX derivatives markets.
- ISBN
-
978-3-95729-513-2
- Sprache
-
Englisch
- Erschienen in
-
Series: Bundesbank Discussion Paper ; No. 42/2018
- Klassifikation
-
Wirtschaft
Market Structure, Pricing, and Design: General
Interest Rates: Determination, Term Structure, and Effects
International Finance: General
Foreign Exchange
International Financial Markets
- Thema
-
FX markets
hedging
price determination
global banks
international finance
- Ereignis
-
Geistige Schöpfung
- (wer)
-
Abbassi, Puriya
Bräuning, Falk
- Ereignis
-
Veröffentlichung
- (wer)
-
Deutsche Bundesbank
- (wo)
-
Frankfurt a. M.
- (wann)
-
2018
- Handle
- Letzte Aktualisierung
-
10.03.2025, 11:41 MEZ
Datenpartner
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.
Objekttyp
- Arbeitspapier
Beteiligte
- Abbassi, Puriya
- Bräuning, Falk
- Deutsche Bundesbank
Entstanden
- 2018
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