• Hedged vs. Unhedged ETFs: What drives the Currency Demand of Investors?

• Do Funds Engage in Optimal FX Hedging?,  Swiss Finance Institute Research Paper No.  24-103, November 2024 with Harald Hau.

Abstract: Using comprehensive new contract level data (EMIR) for the period 2019-2023, we explore how the FX derivative trading by European funds compares to a feasible theoretical benchmark of optimal hedging. We find that hedging behavior by all fund types is often partial, unitary (i.e., with a single currency focus), and sub-optimal. Overall, the observed FX derivative trading does not significantly reduce the return risk of the average European investment funds, even though optimal hedging strategies could without incurring substantial trading costs. 

Presentations: SFS Cavalcade North America 2025; Seminars: Geneva Finance Research Institute, European Central Bank

•  Can Time-Varying Currency Risk Hedging Explain Exchange Rates?, Swiss Finance Institute Research Paper No. 22-77, October 2022 with Harald Hau

Abstract: We argue that changes in international bond positions are an important driver of net hedging positions in derivative markets, which in turn influence the exchange rate. Using intermediaries’ capital ratio as a supply shifter, we identify a price inelastic derivative demand by institutional investors and document that changes in their net hedging positions can account for approximately 30% of all monthly variation in the seven most important dollar exchange rates from 2012 to 2022.

Presentations: 12th Workshop on Exchange Rates organized by the BIS, the Banca d’Italia and the ECB;  SFS Cavalcade North America 2023; European Finance Association 2023; Young Swiss Economists Meeting 2023; American Finance Association 2024; European Winter Finance Summit 2025; Seminars: University of Lausanne; University of Zurich; Geneva Finance Research Institute

Latest version here

Slides for EFA 2023 here

•  Ungleichgewichte im Handel als Ursache von Wechselkursschwankungen, Schmalenbach IMPULSE 3(2): 1-9, December 2023 with Harald Hau

•  Monetary Policy Transmission Over the Leverage Cycle: Evidence for the Euro Area, ECB Working Paper No. 20202421, June 2020 with Gerhard Rünstler

Abstract: We study state dependence in the impact of monetary policy shocks over the leverage cycle for a panel of 10 euro area countries. We use a Bayesian Threshold Panel SVAR with regime classifications based on credit and house prices cycles. We find that monetary policy shocks trigger a smaller response of GDP, but a larger response of inflation during low states of the cycle. The shift in the inflation-output trade-off may result from higher macro-economic uncertainty in low leverage states. For an alternative regime classification based on turning points we find larger effects on GDP during contractions.