Rmb Forward Exchange Market Research

With the increasing fluctuation trend of the foreign exchange rate inthe international financial market and the reforming of the exchange rateregime of China, all the foreign exchange position holders and dealers areconfronting increasing foreign exchange risk. The existence of the foreignexchange risk urges the formation of the RMB foreign exchange forwardsmarket. The RMB foreign exchange forwards market has been keptdeveloping in these years and has played an importance role in thedevelopment of the economy of China. However, there are someproblems with the market that can't be avoided mentioning. The foreignexchange forwards market wouldn't function well until these problemsare solved. This thesis studies the RMB foreign exchange forwards market ofChina and emphasizes on problem analyzing and solving of the market.The logic blueprint of the thesis is as follows: the foreign exchange riskhas been put forward at the beginning and leads to the statement of theimportance of the foreign exchange forwards trading. Then, thedeveloping course and the current complexion of the market has beenintroduced. The basic theory of the foreign exchange forwards and thetheory's applicability in China has been discussed before the pricing andstructural imbalance problem was analyzed. The reformation methods ofthose problems have been discussed at last. The author states that theRMB foreign exchange forwards market plays very importance role in theeconomy of China despite all those problems it has. The thesis consists of four chapters. The first chapter introduces the foreign exchange rate risk of RMBand the foreign exchange forwards trading. In the first section, two casesof foreign exchange risk are put forward to show the importance of theforeign exchange risk management. And the unique foreign exchange riskthat the enterprises and the banks confronts because of the currentexchange rate regime of China. The second section introduces the foreignexchange forwards trading. The foreign exchange forwards is the mostapplicable foreign exchange risk management method of China becauseof the current stage of the foreign exchange market development. Sectionthree introduces the development of the RMB foreign exchange forwardsmarket and the non-deliverable forwards market of Hong Kong, which isthe non-official RMB foreign exchange forwards market formed becauseof the lack of the RMB forwards market of China. Then, the currentdevelopment state of the RMB forwards market of China is discussed andthe problems of the market are stated. The second chapter introduces the basic theory of the foreignexchange forwards market and it's applicability in China. There are threesections in this chapter. Section one introduces the covered interest rateparity, which is the foundation of the modified interest rate parity model.Although the precondition of the covered interest rate parity is verylimited, it applies the basic method for the foreign exchange forwardspricing. And the idea of the covered interest differential is included in,which gives an accurate measurement method of the flow direction of thearbitrage assets. The second part discusses the modified interest rateparity, which included the supply elasticity of the arbitrage capital and thetrading cost of the foreign exchange forwards. The latter one is moreapplicable for the RMB foreign exchange forwards market of China. Thethird section introduces the modern forward foreign exchange rate theory,which considered the impact of the government and speculator behavioron the forward exchange rate determination. Although the theory can't beapplied into current RMB foreign exchange forwards market of Chinabecause of the strict capital and foreign exchange control. It does give usa new perspective on the RMB forwards market development. Sectionfour is the collection of the studies of Chinese researchers on the interestrate parity of China. Their studies showed that the interest rate parity hasto be modified according to the economic condition of China because thefinancial market of China i...