Comparison Of Foreign Exchange Forward Rate And Foreign NDF In Renminbi

Under the condition of open economy exchange rate is one of the importantmacroeconomic variables. On June19,2010, the people’s bank of China announcedthe exchange rate reform to change the formation mechanism of RMB exchange rateand increase the elasticity of the RMB exchange rate, the changes of spot exchangerate will depend more on the market supply and demand. To predict the movement ofthe RMB exchange rate can help control the external risks and achieve internal andexternal equilibrium, and finally the whole country could maintain sustained andhealthy development of national economy, the RMB price information processingability of the forward which is one of financial derivatives tend to be higher than thespot market, one of its core functions is price discovery function.Considering that Exchange rate prediction is involved in a nonlinear system, thepaper based on the BP neural network use different NDF contracts and domesticforwards to simulate the spot exchange rate of the yuan against the dollar. The resultsshow that among all the NDF contracts, the prediction result of one month NDF is thebest, and the prediction result of one month DF is the best which can fit the movementof the RMB exchange rate well. Domestic RMB forward is more suitable forforecasting the spot exchange rate and the price discovery function of Domestic RMBforward is better than NDF overseas.