Heterogeneous Views and Currency Swing Prediction: Evidence from Trade Repository Data

Kohei Maehashi, Daisuke Miyakawa and Takatoshi Sasaki
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Kohei Maehashi: Bank of Japan
Daisuke Miyakawa: Waseda University
Takatoshi Sasaki: Bank of Japan

No 26-E-10, Bank of Japan Working Paper Series from Bank of Japan

Abstract: In this paper, we develop a model to predict large currency swings using transaction-level data on foreign exchange options, collected by trade repositories (TRs). These data allow us to capture heterogeneous currency risk perceptions of individual market participants. By applying a quantile regression combined with machine learning for variable selection, we find that market participants' views extracted from trade repository data significantly improve the predictions of large currency swings.

Keywords: Currency swing; Granular data; Trade repository; Foreign exchange option; Quantile regression; Variable selection (search for similar items in EconPapers)
JEL-codes: C22 C55 F31 G17 (search for similar items in EconPapers)
Date: 2026-05-29
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