Reserve Management at Danmarks Nationalbank: Combining Liquidity Tiers with an Adaptive Risk Budget

Morten Kjærgaard (), Rasmus Vahle () and Jacob Wellendorph Ejsing ()
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Morten Kjærgaard: Danmarks Nationalbank
Rasmus Vahle: Danmarks Nationalbank
Jacob Wellendorph Ejsing: Danmarks Nationalbank

Chapter Chapter 13 in Asset Management at Central Banks and Monetary Authorities, 2020, pp 211-224 from Springer

Abstract: Abstract Over the recent years, Danmarks Nationalbank has transformed its approach to reserve management. The new framework is organized around two main pillars—a tiered liquidity management framework and an overall risk budget. Together they provide a framework for handling large balance sheet fluctuations—a consequence of the fixed exchange-rate policy—while aligning long-term exposure to investment risk with the primary policy objectives. The anchoring of the risk budget to a “policy portfolio” clarifies the risk and return implications of the bank’s multiple objectives and highlights the rationale for diversification.

Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-030-43457-1_13

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DOI: 10.1007/978-3-030-43457-1_13

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