Research On The Relevance Between NDF Market And Spot Market

Since July 21, 2005 exchange rate formation mechanism reform in China from the date of the RMB exchange rate volatility has significantly strengthened, multinational corporations and financial institutions make use of derivative financial instruments to avoid the risk of the demand for the RMB exchange rate to increase significantly. However, the current products of China's foreign exchange derivatives market volume and trading volume far from enough to meet this need. This offshore yuan derivatives market provides a development of the soil. RMB NDF market in Singapore since 1996 after emerging from strength to strength in 2007, CME launched renminbi futures and options trading. On the one hand, the development of external markets to meet the hedging and speculative demand for the transaction, on the other hand, the territory of the exchange rate gradually started to have an impact on market pricing.In this paper, a combination of theory and empirical methods. First of all, the use of interest rate parity theory and in the offshore market and the offshore market transmission mechanism, the use of cointegration tests, Granger causality test, impulse response function, variance analysis, econometric methods, the duration of the RMB exchange rate and the territory of NDF spot exchange rate of the long-run equilibrium relationship between the transmission mechanisms, information and market influence of the impact of the empirical analysis. The results show that: the exchange rate formation mechanism reform, the RMB NDF exchange rate in line with the interest rate parity theory, NDF rate and the territory of the spot exchange rate, interest rates inside and outside the relationship between the existence of conduction. In short-term (1 week, 1 month and 3-month period) NDF rate and the spot exchange rate of the territory of the existence of long-run equilibrium relationship, while the medium and long-term (1 year, 3-year and 5-year period) NDF does not exist. In the conduction mechanism, the territory of the spot exchange rate is the short-term and medium-term exchange rate Granger causes NDF and NDF rate and the existence of short-term to guide the interaction between each other. Second, the attempt to explore the territory of the RMB NDF rate and the spot exchange rate and the relevance of the RMB NDF market and early-warning mechanism. The use of Efficient Market Hypothesis in the NDF market to expand the market of the territory of "stabilizer" feature and offshore NDF market "accelerator" feature for the empirical testing; and the use of financial deepening theory, China's foreign exchange market through the process of financial deepening of the analysis, discussed RMB NDF market and the feasibility of shore. Finally, this article summarized the yuan to expand and foreign exchange derivatives market and the fact that the path optimization initiatives.