). at the same time, the swiss franc had weakened to its lowest level against the danish krone for 8 - 9 years. the decline in net lending may be due to expectations that the swiss franc would rally. this is confirmed by statistical analyses of data for a large number of years. the analyses find significant correlation between a weaker swiss franc and diminishing net lending. it is interesting that the danish carry speculators show a different reaction pattern to the yen carry speculators. the yen carry speculators leave their positions when the yen strengthens, apparently fearing that the strengthening forewarns an imminent stronger adjustment of the exchange rate. our domestic swiss franc speculators increase their positions when the franc strengthens, apparently believing the strengthening to be temporary. the danish swiss franc carry loan strategy is naturally far too small and insignificant to present a threat to the global financial system. the risk is rather related to the economic situation of the individual borrowers if the swiss franc strengthens against the krone. in this case too, the fat tails will sting investors if they strike. another new type of financial product that has appeared in denmark in recent years is indexed bonds. the banks'sales of this type of bonds have increased strongly since the start in 1998. at the beginning of april 2007 the outstanding volume listed on the copenhagen stock exchange was kr. 52 billion ( slide 16 ). in the next monetary review from danmarks nationalbank we will present an analysis of this product. i can already describe some of the results here. the product comprises both a relatively safe investment in bonds and an investment in options. the option investment is pegged to the development in e. g. equities, exchange rates or commodities. the product has expanded the investment universe open to private investors. we can now all speculate in whether the price of copper or of australian dollars is on its way up. one positive characteristic of indexed bonds is that any loss is often limited to a relatively small proportion of the invested amount. however, this is not sufficient to make the investment sound. indexed bonds are illiquid instruments and often have a complex structure that many can find hard to grasp. so what is the pay - off from this complexity? a high yield? not necessarily. at danmarks nationalbank we have reviewed 67 indexed bonds for a nominal value of approximately kr. 18 billion. the bonds were all listed on the copenhagen stock exchange, but have

to determine in advance when a realistic optimism has passed into over - optimism and in its turn pushed up asset prices, investment, consumption and indebtedness. it has rarely been possible to judge, for instance, whether a large build - up in indebtedness has expressed an adaptation to realistically based expectations of future growth prospects or whether the build - up in debt is based on exaggerated expectations. in addition, the target that has been used to guide monetary policy has rarely been able to signal early enough that imbalances were being built up, regardless of whether monetary policy was aimed at a fixed exchange rate or towards a price stability target. to simplify, one can say that the result of an exaggerated optimism in countries with a fixed exchange rate has been that the build - up of financial imbalances was expressed in rising inflation without any depreciation pressure on the currency. it has not been possible to subdue inflationary pressure through raising interest rates while optimism regarding the country's economy and confidence in the fixed exchange rate regime have remained, as a more stringent monetary policy would have reinforced the nominal exchange rate. at the same time, increases in consumer prices have been kept down by the strong currency, temporary increases in productivity, or by demand being aimed towards, property, shares and land – assets whose prices are not included in the central bank's target function. there has thus been no reason for monetary policy to counteract the emergence of financial imbalances. when the financial bubble has actually burst, the country has often suffered a deep and long - lasting recession caused by adaptations to the imbalances that have been built up. a high level of indebtedness, falling asset prices and unprofitable investments have subdued demand for a long period of time. households have chosen to increase their savings to reduce their debts. companies have been unable or unwilling to invest as a result of earlier investment mistakes and poorer prospects for the future. the banks have suffered severe credit losses, which has further intensified the recession, as their capacity to provide new credit has been limited. the situation becomes particularly serious when losses have led to acute bank crises, which has often been due to the banks being greatly exposed to a particular sector. for instance, it was an overheated property market with banks strongly exposed to this sector that was one of the main reasons behind the bank crises afflicting several countries – including sweden – at the beginning of the 1990s. adaptations to large financial im