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Linkage of Non-Deliverable Rupee Forwards with the Onshore Spot and Forwards Market

Satish D.*, V. Sankara Narayanan**, Anubhav***

* Assistant Professor, Department of Finance, IBS Hyderabad, India.

** Chief Manager, Integrated Treasury Branch, UCO Bank, India.

*** Student, Department of Management, IBS Hyderabad, India.

Periodicity:September - November'2010
DOI : https://doi.org/10.26634/jmgt.5.2.1295

Abstract

The paper does a detailed analysis of Non Deliverable Forwards (NDF) rupee market with a view to understand the linkages between domestic Spot, forwards and off shore NDF market for Indian rupee Various tests are done on the data for the period 1st January 2007 to 31st March 2010. The paper finds that the bid-ask spread is less in case of domestic market than that of the NDF market which clearly suggests that there is higher liquidity in the domestic market. . ARCH/GARCH test also suggests that the volatility in the NDF market is more than that of onshore market. Interestingly, the results of Granger Causality Test suggest that there is sufficient information flow between onshore Spot, forwards market and NDF market with two way causality between onshore Spot market and NDF market. This means that the policy makers cannot ignore the importance of NDF markets.

Keywords

Non-deliverable forwards,Volatility,Bid-Ask spread,Spill over effect, GARCH model,Granger Causality Test.

How to Cite this Article?

Satish D., V. Sankara Narayanan and Anubhav (2010). Linkage of Non-Deliverable Rupee Forwards with the Onshore Spot and Forwards Market. i-manager’s Journal on Management, 5(2), 13-24. https://doi.org/10.26634/jmgt.5.2.1295

References

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Single Article

	North Americas,UK, Middle East,Europe		India	Rest of world
	USD	EUR	INR	USD-ROW
Online	15	15

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