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Non-deliverable forwards: 2013 and beyond

Author

Listed:
  • Robert N McCauley
  • Chang Shu
  • Guonan Ma

Abstract

n-deliverable forwards (NDFs) allow investors and borrowers to take positions in currencies that are subject to official controls. Turnover in NDFs has risen in recent years as non-residents use them to hedge increasing investment in local currency bonds. Pricing in deliverable forward and NDF markets is segmented, with NDFs leading in times of strain. Experience shows that NDF markets tend to fade away gradually after liberalisation. But, looking ahead, market centralisation might reduce the costs of maintaining them. In a unique development, offshore deliverable renminbi forwards are gaining on the established NDF.

Suggested Citation

  • Robert N McCauley & Chang Shu & Guonan Ma, 2014. "Non-deliverable forwards: 2013 and beyond," BIS Quarterly Review, Bank for International Settlements, March.
  • Handle: RePEc:bis:bisqtr:1403h
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    References listed on IDEAS

    as
    1. Guy Debelle & Jacob Gyntelberg & Michael Plumb, 2006. "Forward currency markets in Asia: lessons from the Australian experience," BIS Quarterly Review, Bank for International Settlements, September.
    2. Dagfinn Rime & Andreas Schrimpf, 2013. "The anatomy of the global FX market through the lens of the 2013 Triennial Survey," BIS Quarterly Review, Bank for International Settlements, December.
    3. Guonan Ma & Corrinne Ho & Robert N McCauley, 2004. "The markets for non-deliverable forwards in Asian currencies," BIS Quarterly Review, Bank for International Settlements, June.
    4. Torsten Ehlers & Frank Packer, 2013. "FX and derivatives markets in emerging economies and the internationalisation of their currencies," BIS Quarterly Review, Bank for International Settlements, December.
    5. Ma, Guonan & McCauley, Robert N., 2013. "Is China or India more financially open?," Journal of International Money and Finance, Elsevier, vol. 39(C), pages 6-27.
    6. Harendra Kumar Behera, 2011. "Onshore and offshore market for Indian rupee: recent evidence on volatility and shock spillover," Macroeconomics and Finance in Emerging Market Economies, Taylor & Francis Journals, vol. 4(1), pages 43-55.
    7. John Cairns & Corrinne Ho & Robert McCauley, 2007. "Exchange rates and global volatility: implications for Asia-Pacific currencies," BIS Quarterly Review, Bank for International Settlements, March.
    8. Robert N. McCauley, 2013. "Renminbi internationalisation and China’s financial development," Journal of Chinese Economic and Business Studies, Taylor & Francis Journals, vol. 11(2), pages 101-115, May.
    9. Morten Bech & Jhuvesh Sobrun, 2013. "FX market trends before, between and beyond Triennial Surveys," BIS Quarterly Review, Bank for International Settlements, December.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Richard M Levich & Frank Packer, 2015. "Development and functioning of FX markets in Asia and the Pacific," BIS Papers chapters,in: Bank for International Settlements (ed.), Cross-border Financial Linkages: Challenges for Monetary Policy and Financial Stability, volume 82, pages 75-132 Bank for International Settlements.
    2. David Leung & John Fu, 2014. "Interactions between CNY and CNH Money and Forward Exchange Markets," Working Papers 132014, Hong Kong Institute for Monetary Research.
    3. Guonan Ma & Robert N. McCauley, 2014. "Financial openness of China and India: Implications for capital account liberalisation," Working Papers 827, Bruegel.
    4. Barry Eichengreen & Romain Lafarguette & Arnaud Mehl, 2016. "Cables, Sharks and Servers: Technology and the Geography of the Foreign Exchange Market," NBER Working Papers 21884, National Bureau of Economic Research, Inc.
    5. Funke, Michael & Shu, Chang & Cheng, Xiaoqiang & Eraslan, Sercan, 2015. "Assessing the CNH–CNY pricing differential: Role of fundamentals, contagion and policy," Journal of International Money and Finance, Elsevier, vol. 59(C), pages 245-262.
    6. Shu, Chang & He, Dong & Cheng, Xiaoqiang, 2015. "One currency, two markets: the renminbi's growing influence in Asia-Pacific," China Economic Review, Elsevier, vol. 33(C), pages 163-178.
    7. repec:kap:iaecre:v:24:y:2018:i:2:d:10.1007_s11294-018-9682-z is not listed on IDEAS
    8. Robert Neil McCauley & Chang Shu, 2016. "Non-deliverable forwards: impact of currency internationalisation and derivatives reform," BIS Quarterly Review, Bank for International Settlements, December.
    9. Renu Kohli, 2015. "Capital Flows and Exchange Rate Volatility in India: How Crucial Are Reserves?," Review of Development Economics, Wiley Blackwell, vol. 19(3), pages 577-591, August.

    More about this item

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation

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