Information Flows across Non-Deliverable Forwards, Deliverable Forwards and Spot Markets: Evidence from Korean Won and Rmb

This paper investigates the interrelation and information flows across the Won-dollar and RMB-dollar spot, deliverable forward (DF) and non-deliverable forward (NDF) markets on different openness policy backgrounds. Using the constant conditional correlation GJR multivariate GARCHM model, the dynamic conditional correlation GARCH model and copula models, this paper finds that opening up NDF and capital liberalization bring better market integration as well as higher volatility. At the same time the effectiveness of central bank interventions and the independence of economics policies might be affected. Policies of market segmentation help improve the influence of onshore markets on price discovery, especially when DF markets are not well-developed, although these policies are not sustainable.