| China’s economy is in a transition period; the degree of financial liberalization is constantly deepening and price fluctuations in the financial products are increasing day-by-day. Meanwhile, the size of the financial market has continued to expand, a large amount of capital flows in the international market and the exchange rate market share position has become increasingly important. In recent years the foreign exchange market has become increasingly fused together, demonstrating the dynamic and complex cooperation in the different markets and the risk of exchange rate fluctuations. The level of development in the foreign exchange market illustrates the level of economic growthin the country. Data from June 19,2010 to March 31,2015, the period after the second exchange reform, is used here. Theoretical modelling and empirical analysis methods were used in the study.This paper mainly studies the exchange rate risk to the interest rate and the market exchange ratebased on the linkage metric. In recent years, the foreign exchange market has seen growing integration. This shows the dynamic and complex cooperation in the currency market and the risk of volatility in different areas. Along with trade and its different resources and worldwide impact, the foreign exchange market has become one of the largest and most complex dynamic economic systems. The foreign exchange market receives benefits from academia and industry, because the foreign exchange market is akey variable in international trade in the international economy and has a strategic role. Regarding the pastrelative single market structure, compared with the development of science and technology in recent years, global economic integration to promote the foreign exchange market means it has become one of the world’s most complete markets. The foreign exchange market and the external market are closely related to, and are vulnerable to, external shocks. Also, greatly increased volatility in the foreign exchange market means that the investors are facing risks to their investment portfolios. Theoretically speaking, when investing in different foreign exchange markets and analysing portfolio risk measurement there is a need to estimate and consider the volatility of movement in the modelling process and the relationship between them.Firstly, the exchange rate-the interest rate linkage between the theoretical model, a brief introduction, the macroeconomic to MFD model based on China’s exchange rate and interest rate linkage is analysed. Then, based on the VAR model of the exchange rate interest rates linkage relationship, through the relationship between ADF test, co-integrationtest, Granger causality test, VAR model and impulse-response function to achieve a statistical measurement method. Using VARMA-DCC-MGARCH model and MSV model, the volatility and volatility of RMB exchange rate and interest rate are empirically tested, and the two linkage models are compared. The empirical results show that there is a horizontal (mean) linkage between the RMB exchange rate and the interest rate, and there is a two-way fluctuation interaction. MGARCH model analysis of exchange rate volatility linkage relationship is better than MSV model. Finally this paper rate-interest rate linkage based selection model VAR-DCC-MGARCH on exchange rate market risk VaR measure research, empirical analysis based on VARMA-DCC-MGARCH model of the VaR forecast accuracy is higher. |
PDF Full Text Request