Research On The Interaction Between Onshore RMB Exchange Market And Offshore RMB Exchange Market

Currently,there are a number of relatively independent and interrelated RMB markets.Although these markets are all subject to trading in RMB,there are still significant differences among those markets due to the fact that the RMB has not yet achieved full convertibility and the capital account is still restricted.With the deepening of RMB exchange rate reform and the internationalization of RMB,RMB markets are developing rapidly,which makes the research necessary and meaningful.In this paper,the jump behavior between Onshore and Offshore RMB markets is studied with a sample between February 28,2011 and June 30,2016 in the Hong Kong offshore RMB exchange market(CNH)and Onshore RMB exchange marker(CNY).The paper is divided into three parts.Firstly,we use descriptive statistical analysis and cross-correlation analysis to analyze the basic statistical characteristics and jump behavior of the two markets.We find that two RMB exchange markets have similar volatility aggregation and high correlation.We also find that the release of information makes different influences on those markets.On this basis,we use the Hawkes jump diffusion model to study the phenomenon of self-excitation and cross-excitation between CNH and CNY.Research shows both phenomena are significant,which means a jump in one market increases the intensity of jumps both in the same market as well as in other markets.Finally,this paper holds that the jump linkage between CNH and CNY depends on the market participants'micro-behavior,information transfer and investor expectation.And the strength depends mainly on market pricing mechanism,capital return mechanism and other factors.Based on the Hawkes jump diffusion model,this paper investigates the jump behavior between CNH and CNY.This not only provides investors with an effective reference for asset allocation and risk diversification,but also helps risk supervisors achieve more effective risk management.