Denmark’s move to a holistic and dynamic risk budget

Since the 1980s, Denmark has successfully maintained a fixed exchange rate policy, first against the Deutschemark and, since 1999, against the euro. To support the currency peg and safeguard financial stability, liquidity management of the country’s foreign reserve is of primary policy importance to its central bank, the National Bank of Denmark. Over the past decade, the central bank has intervened frequently in foreign exchange markets, and has had to navigate both massive currency outflows and inflows.

Although the foremost concern of reserve management is to ensure the availability of