Int. J. of Business Continuity and Risk Management   »   2014 Vol.5, No.3

 

 

Title: Dynamic correlations in international oil and RMB non-deliverable forwards markets

 

Authors: Ling Liu; Yan Fang

 

Addresses:
School of Financial, Shanghai University of International Business and Economics, No. 1900 Wenxiang Road, Songjiang District, Shanghai, 201620, China
School of Financial, Shanghai University of International Business and Economics, No. 1900 Wenxiang Road, Songjiang District, Shanghai, 201620, China

 

Abstract: This paper investigates dynamic between oil markets and RMB non-deliverable forwards (NDF) markets. The analysis is carried out through the Dynamic Conditional Correlation (DCC) model of Engle (2002). We find that the rising of international oil price return leads to the decline of RMB nominal exchange rate return. This paper uses FDCC-MVGARCH model of the block-diagonal structure to analyse the dynamic correlation between international oil price and RMB Non-deliverable Forwards, and the correlation between RMB NDFs of CME and that of Hong Kong. The correlation between international oil price and RMB NDFs is more than 43 times of that between international oil price and RMB nominal exchange rate. There is a strong correlation between the RMB NDFs returns of CME and that of HSBC Hong Kong.

 

Keywords: RMB; NDFs; non-deliverable forwards; FDCC-MVGARCH model; international oil price; renminbi; oil markets; DCC; dynamic conditional correlation; nominal exchange rates; Hong Kong.

 

DOI: 10.1504/IJBCRM.2014.066156

 

Int. J. of Business Continuity and Risk Management, 2014 Vol.5, No.3, pp.224 - 235

 

Submission date: 31 Mar 2014
Date of acceptance: 05 Aug 2014
Available online: 03 Dec 2014

 

 

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