The Comparative Analysis Of Information Superior Ity Of NDF And DF Markets

The information superiority of a market means the ability of the market to influent the price change of related markets. The comparative analysis of information superiority of NDF and DF markets aims to discuss their relative abilities to influence the future tendency of spot rate market of RMB. It really matters because it is closely related to the possibility of proper adjustment of spot rate of RMB after restart of exchange rate reform.On the problem of relationship between spot and forward rates, foreign scholars have done a lot of research on currencies of open economy, and have made much achievement. However, there has not been enough research done on RMB, most of which are focused on the information flow between spot, DF and NDF markets. Results are different depending on different time intervals. The comparative disadvantage of the existing studies is the obsolete data based on which conclusions are made. In this thesis, the author aims to make some improvement by analyzing new situation after restart of exchange rate reform of RMB, using most current data.The domestic forward foreign exchange markets in China, also known as the Deliverable Forward Markets of RMB (DF market), include retail markets and inter-bank forward exchange markets. The off-shore forward foreign exchange markets of RMB include the Non-Deliverable Forward Markets of RMB (NDF market) and the markets of RMB forward and future in the Chicago Mercantile Exchange. Based on the availability of data, the scale and maturity of different markets, the author chooses the NDF market as the representative of the off-shore forward foreign exchange markets, and analyses the comparative influence of domestic and off-shore forward foreign exchange markets on the spot exchange rate markets of RMB after restart of exchange rate reform.First of all, the author sums up the existing research on this subject, and describes the development history and current situation of RMB DF and NDF markets. Based on this, some time series model are made to analyze the comparative ability of these two markets to impact the future change of price in spot exchange rate market of RMB after restart of RMB exchange rate reform. What's more, in this thesis, the author derives two indice of depreciation pressure from the covered Interest Rate Parity, and checks their influence on the price change of spot exchange rate market of RMB. Since the indice of depreciation pressure covers the information of domestic and off-shore interest rates which have not been covered by the indice of forward exchange rates themselves, they should do better in the comparative analysis of information superiority of DF and NDF markets. By calculating the DF and NDF depreciation pressure indice and making empirical tests for them, the author gets a more comprehensive picture of this subject.The results of all the empirical tests show that, both DF and NDF indice themselves have some predictive ability of future price change of RMB spot market, but the DF depreciation pressure index does not have as much predictive ability as the NDF depreciation pressure index. What's more, the Granger Causality Test also shows that the NDF market has the information superiority over the DF market in impacting the price change of RMB spot exchange rate market. That is the current situation in the relationship of RMB DF, NDF and spot exchange rate market after restart of exchange rate reform of RMB.At the end of the thesis, the author reveals the reason why the RMB NDF markets has the information superiority and raises some solution for the improvement for the RMB DF markets from two angles. By doing this, the financial security and coordination development of internal and external economy can be realized in China.