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What Drives Sectoral Differences in Currency Derivate Usage in a Small Open Economy? Evidence from Supervisory Data

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Listed:
  • Zuzana Gric
  • Jan Janku
  • Simona Malovana

Abstract

Using a sample of nearly 980,000 new derivative transactions from about 1,700 unique institutions, we explore sectoral differences in currency derivatives usage in the Czech financial sector from 2020 to 2022. We find that larger financial institutions, institutions that are part of complex financial groups, and institutions with higher foreign exposure are more likely to engage in currency derivative transactions. Contrary to other studies, we find that financially stable institutions use currency derivatives more frequently, reflecting the long-term stability of the Czech financial system. However, the significance of key characteristics varies across financial segments. Banks are less sensitive to changes in leverage, while liquidity is crucial for investment funds.

Suggested Citation

  • Zuzana Gric & Jan Janku & Simona Malovana, 2023. "What Drives Sectoral Differences in Currency Derivate Usage in a Small Open Economy? Evidence from Supervisory Data," Working Papers 2023/12, Czech National Bank.
    • Handle: RePEc:cnb:wpaper:2023/12
    as

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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Currency derivatives; EMIR; FX derivatives; GLEIF; market-based finance;
    All these keywords.

    JEL classification:

    • F30 - International Economics - - International Finance - - - General
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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