Arbeitspapier
Foreign exchange dealer asset pricing
We show that excess returns to the carry trade can be interpreted as compensation for foreign exchange dealers' capital risk. Given that the top market makers in foreign exchange are at the heart of the market's information aggregation process we also suggest that it is their marginal value of wealth which prices foreign currencies. Consistent with this hypothesis the empirical results show that shocks to the equity capital ratios of the top three foreign exchange dealers have explanatory power for the cross-sectional variation in expected currency market returns, while those of the average dealer provide no substantial additional information.
- ISBN
-
978-3-95729-637-5
- Language
-
Englisch
- Bibliographic citation
-
Series: Deutsche Bundesbank Discussion Paper ; No. 39/2019
- Classification
-
Wirtschaft
Foreign Exchange
Asset Pricing; Trading Volume; Bond Interest Rates
International Financial Markets
- Subject
-
Carry Trades
FX Dealers
Currency Risk
Intermediary Asset Pricing
- Event
-
Geistige Schöpfung
- (who)
-
Reitz, Stefan
Umlandt, Dennis
- Event
-
Veröffentlichung
- (who)
-
Deutsche Bundesbank
- (where)
-
Frankfurt a. M.
- (when)
-
2019
- Handle
- Last update
-
10.03.2025, 11:43 AM CET
Data provider
This object is provided by:
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Reitz, Stefan
- Umlandt, Dennis
- Deutsche Bundesbank
Time of origin
- 2019
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