Using Hasbrouck’s (1995, 2002) information share method, we examine the mutual price discovery dynamics among Won/Dollar spot, forward, and NDF exchange rates in on- and off-shore FX markets. Our findings include : (i) During the entire period, the mutual price discovery between on-shore FX market and off-shore NDF market are significantly led by on-shore Won-Dollar spot and forward exchange rates. (ii) Within the period around the global crisis, NDF exchange rates have mutual influence on the price discovery, which is expecially greater than the any other period. The results show Won-Dollar spot exchange rate fluctuations during the global crisis are greatly affected by external factors of the international financial markets. Not only that, but off-shore NDF trading promptly reflects the price information of KRW on the factors.
Research Article|
May 31 2016
Evidences for Price Discovery between On- and Off-shore Won/Dollar Spot, Forward and NDF FX Rate
Won Seop Lee
Won Seop Lee
Seoul Credit Rating Inc
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Publisher: Emerald Publishing on behalf of Korea Derivatives Association
Online ISSN: 2713-6647
Print ISSN: 1229-988X
© 2016 Emerald Publishing Limited
2016
This article is published under the Creative Commons Attribution (CC BY 4.0) licence. Anyone may reproduce, distribute, translate and create derivative works of this article (for both commercial and non-commercial purposes), subject to full attribution to the original publication and authors. The full terms of this licence may be seen at http://creativecommons.org/licences/by/4.0/legalcode
Journal of Derivatives and Quantitative Studies: Seonmul yeon’gu (2016) 24 (2): 339–363.
Citation
Binh KB, Lee S, Lee WS (2016), "Evidences for Price Discovery between On- and Off-shore Won/Dollar Spot, Forward and NDF FX Rate". Journal of Derivatives and Quantitative Studies: Seonmul yeon’gu, Vol. 24 No. 2 pp. 339–363, doi: https://doi.org/10.1108/JDQS-02-2016-B0006
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