Dealer Risk Premiums in FX Forecasts

32 Pages Posted: 21 Jul 2023

See all articles by Joscha Beckmann

Joscha Beckmann

FernUniversität in Hagen; Kiel Institute for the World Economy

Stefan Reitz

University of Kiel - Institute for Quantitative Business and Economics Research (QBER)

Date Written: July 17, 2023

Abstract

In this paper, we re-assess the role of risk premiums in FX survey forecasts. Given that market makers in foreign exchange are both price setters and contributors to surveys such as Consensus Forecasts or FX4Casts we may expect risk premiums of FX liquidity provision to emerge in forecast data as well. Consistently, the empirical analysis shows that FX forecasts are strongly correlated with risk premiums calculated from FX derivatives as well as dealer balance sheet factors.

Keywords: Survey Forecasts, FX Dealers, Currency Risk, Intermediary Asset Pricing

JEL Classification: F31, G12, G15

Suggested Citation

Beckmann, Joscha and Reitz, Stefan, Dealer Risk Premiums in FX Forecasts (July 17, 2023). Available at SSRN: https://ssrn.com/abstract=4513275 or http://dx.doi.org/10.2139/ssrn.4513275

Joscha Beckmann (Contact Author)

FernUniversität in Hagen ( email )

Universitätsstrasse 41
Feithstrathe 140
Hagen, 58084
Germany

Kiel Institute for the World Economy ( email )

P.O. Box 4309
Kiel, Schleswig-Hosltein D-24100
Germany

Stefan Reitz

University of Kiel - Institute for Quantitative Business and Economics Research (QBER) ( email )

Heinrich-Hecht-Platz 9
Kiel, 24118
Germany

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
109
Abstract Views
345
Rank
454,671
PlumX Metrics