Research On The Relationship Among The RMB Currency Forward Markets And The Construction Of Multi-level Foreign Exchange Market

On July21,2005, China began to implement managed floating exchange rate system, which based on market supply and demand, and refers to a basket of currencies. It took a really big step for the reform of RMB exchange rate. Since the revaluation, exchange rates fluctuate in a larger range, the demand of various economic entities involved in foreign exchange deal in oder to avoid foreign exchange risk is also increasingly urgent, which raises a claim to establish an effective multi-level foreign exchange derivatives market in our country. With the empirical research for the spot and the forward market of foreign exchange, we can understand the current situation of the development of the foreign exchange market, also provide an empirical basis to perfect foreign exchange derivatives market.This paper firstly combs Chinese foreign exchange market development history, then theoretically analyses the information flow relationship between the foreign exchange markets. Combined with theoretical analysis, this paper uses Granger causality test based on the error correction model and DCC-MVGARCH model under M-GARCH framework, respectively from the price premium effect and the volatility spillover effect to research the relationship among RMB spot market, the domestic forwards market, the Hong Kong offshore forwards market and the NDF market. The empirical result shows that the offshore NDF market occupies the dominant position in terms of price premium and volatility spillover, and the domestic forwards market is affected by the NDF market both in the price premium and the volatility spillover seriously. Due to a late start, the influence of the Hong Kong offshore forwards market to the domestic forwards market is not obvious, but it is also influenced by the offshore NDF market.At last, in reference to the development experience of the international foreign exchange derivatives market, this paper proposes the thinking of building a multi-level foreign exchange derivatives market:through the construction of multi-level foreign exchange derivatives market infrastructure, trade categories and market participants, we can finally form a perfect effective RMB foreign exchange derivatives market in China.