Study On The Problems And Causes Of The Deviation Of Rmb Forward Exchange Rate

Interest rate parity theory is the base of explaining the problem of forward rate pricing. Our country’s forward rate pricing is lack of explanation within borders, and it is also very difficult to control the forward rate overseas.It leads to the deviation between domestic and foreign forward exchange rate and the theoretical forward rate and the spot rate in the future,so it is difficult to meet the interest rate parity’s prerequisite. This deviation reflects the expectation of appreciation and devaluation of the renminbi.However,it will influence investors to judge the forward market,and it also increases the difficulties of China’s economic policy-making. Our development of the market is far less than other developed countries, and there is sustained, significant deviations between the actual forward rate and the expected exchange rate,and it can not simply be explained by certain factors such as transaction costs. It determines that our countiy’s forward rate pricing has a profound meaning. From the information of two parallel domestic and foreign forward market research,we can find that we can deeply understand the characteristics and trends of the forward foreign exchange market.It also has theoretical and practical meanings to control China’s forward rate market and policy reforms in the future.In this paper, start from functions and classification of the forward foreign exchange market, then make a statement on the development and current situation of forward markets within borders and overseas,.At last, regarding interest rate parity theory as a benchmark, we study the problem of the RMB forward exchange rate mispricing and its causes. Research process is around three issues:First, compare the empirical results of SHIBOR and official lending rate in the interest parity and try to determine that which interest rate can more accurately the expected future exchange rate; Second,discuss that whether DF exchange rate or NDF exchange rate is closer to the actual forward rate, that is which market has the same synchronization and correlation with the spot market; Third, from the factors of risk premium, look for the main factors of leading to the deviation of forward rate. This paper select CNY spot rate, each period of NDF, DF exchange, SHIBOR, LIBOR, and one-year statutory lending rate and other data for empirical analysis. The empirical results are that the marketing interest rate SHIBOR can not accurately predict the future exchange rate. Using SJ Copula-MGARCH model to test and verify the dynamic correlation between DF market and the spot market,as well as the dynamic correlation(ie synchronization between markets) between NDF market and the spot market,the empirical results show that the correlation between DF and future spot exchange rate is higher than the correlation between NDF and future spot exchange rate. Further,using multivariate regression model that includes dummy variables for empirical analysis, the results show that in the risk premium factors, the main cause of the deviation of the forward exchange rate is government intervention and foreign exchange reserves.