For general volatility structures for forward rates, the evolution of interest rates may not be Markovian and the entire path may be necessary to capture the dynamics of the term structure. This article identifies con...For general volatility structures for forward rates, the evolution of interest rates may not be Markovian and the entire path may be necessary to capture the dynamics of the term structure. This article identifies conditions on the volatility structure of forward rates that permit the dynamics of the term structure to be represented by a finite-dimensional state variable Markov process. In the deterministic volatility case, we interpret then-factor model as a sum ofn unidimensional models.展开更多
Many published studies have considered information asymmetry between domestic and foreign investors about local assets in the stock market, particularly in developed markets. The present study proposes a new perspecti...Many published studies have considered information asymmetry between domestic and foreign investors about local assets in the stock market, particularly in developed markets. The present study proposes a new perspective to address the issue in the case of China ＂s forward exchange rate market. Following the framework of Clarida and Taylor （1997）, the term structures of exchange rates in the domestic forward and the non-deliverable forward markets are constructed and then applied to predict future spot exchange rates based on a vector equilibrium correction model By comparing the forecast accuracy on the basis of the root mean square error and the mean absolute error, it is shown that dynamic out-of- sample forecasts of the domestic forward market are superior to those of the non-deliverable forward market, suggesting that domestic investors are better informed than foreign investors. The result has several important policy implications, especially for exchange rate determination.展开更多
文摘For general volatility structures for forward rates, the evolution of interest rates may not be Markovian and the entire path may be necessary to capture the dynamics of the term structure. This article identifies conditions on the volatility structure of forward rates that permit the dynamics of the term structure to be represented by a finite-dimensional state variable Markov process. In the deterministic volatility case, we interpret then-factor model as a sum ofn unidimensional models.
基金sponsored by the National Social Science Fund(11BJ022)the Guangdong Province Philosophy Social Science Planning Project(GD10CYJ02)the Guangdong High Level Talent Support Program(2011)
文摘Many published studies have considered information asymmetry between domestic and foreign investors about local assets in the stock market, particularly in developed markets. The present study proposes a new perspective to address the issue in the case of China ＂s forward exchange rate market. Following the framework of Clarida and Taylor （1997）, the term structures of exchange rates in the domestic forward and the non-deliverable forward markets are constructed and then applied to predict future spot exchange rates based on a vector equilibrium correction model By comparing the forecast accuracy on the basis of the root mean square error and the mean absolute error, it is shown that dynamic out-of- sample forecasts of the domestic forward market are superior to those of the non-deliverable forward market, suggesting that domestic investors are better informed than foreign investors. The result has several important policy implications, especially for exchange rate determination.
