Measuring Institutional Investors’ Exposure to Foreign Exchange and to Foreign Assets
Institutional investors are entities that manage the public’s long-term savings. They are therefore important players in the financial system. The Bank of Israel Information and Statistics Department manages a database on institutional investors’ assets. The data are important mainly for monitoring the stability of the financial system and for analyzing it, ensuring the proper operation of the financial markets, and contributing to the compilation of the National Financial Accounts. As part of the on-going monitoring, the Department calculates estimates of members’ exposure to various risks in the portfolio managed for them by the institutional investors, particularly foreign exchange (exchange rate) risk and the risk inherent in exposure to foreign assets. Data on these exposures are published monthly on the Bank of Israel’s website. This work focuses on measuring these two exposures, and includes a description of the database, definitions of the exposures, details of the data sources, and presentation of the main calculations, accompanied by a numerical illustration and an analysis of their significance.
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