the question is about the CNY/USD forward fx rate on .as of 02/07, we can get the following prices from Bloomberg for the CNY/USD fwd fx rate on 17Dec07 price 1: DOZ7 <currency> <go> 02/07 settle price is 0.13292 translating into 7.523 RMB/USD (this is the price implied by CME futures)price 2: NDF <go>, change "currency" to CNY <go>, change the date in the last row to 12/17/07 <go> (the last row is the customized field where you can input your own timebucket) you get a price of 7.396 RMB/USD (this is the price implied by NDF fwds)question: why there is such a big difference (7.523 vs. 7.396)? I understand that settlement and margin requirement etc operational issues will bring some tiny difference... what part do I miss.Hope you gurus can help me out. Cheers

One thing you should take into account is the fact that DOZ7 has limited liquidity. Another is that there is a bid/ask spread on the rates used on the NDF. The fact that the NDFs you see on BBG are non negotiable and usually are t+2 could also influence this difference.I am not saying thats what is determening this large difference - but could certainly influence.

I would probably trust an NDF number over a CME number. FX OTC dominates whats going on in the exchanges. More liquidity on the OTC markets.

The level for offshore NDF maturing Mid-December 2007 is currently around 7.40-7.41 USD/RMB. I also recommend trusting the NDF number. Question: is there an effective turnover (www.cme.com: Volume for Feb 08 = 0) included in the settlement calculation or is it based on previous settlement rate?

Any way of arbitraging the difference? Does this happen with other currencies (like the South Korean Won or the New Taiwan Dollar)?

One other thing. Is there a standard model for pricing CNY NDO's? I have a simple model that gives you the implied volatility of NDO's based on the values of NDF's.The gory details are herehttp://en.wikiversity.org/wiki/Valuation_of_Renminbi_options_using_a_flucutation-dissipation_modelBased on the fluctuation-dissipation theorem, the implied volatility of the NDO's should be a linear function of the difference between the NDF price and the spot price.I've looked in the academic literature and found nothing like it, but I'd be interested in know from practitioners if I'm reinventing the wheel.

Yes. My real queestion is whether there is any arbritrage opportunity out there.My understand is that the CNY/ USD market in the OTC, i.e. the NDF prices reflect where the markets. What confused me was the CME future price. I am thinking that I might have missed something (such as special features in the operations that could affect the final fx payout rate) when read the CME quotes. Or, it could be due to the illiquidity of CME products: only its 1st two contracts are relative liquid, there is no open interest for most of the mid long term dateed contracts. The settle price for Dec07 could also be a problem, it could be a stale prices. Anyway, they are my guess, wish someone in trading could shed some lights.If I had real-time pricing info of CME, I would look at the bid/offere of the Dec07 contract. However, I do not have the access at this moment. Anyone who can share the info?

Talked to a trader and was told that the bid/offer spread of the NDF Dec07 contract is usually less than 1%.Anyone knows what the bid/offer spread of a CME Dec07 contract look like?Thanks.

Here is a linkhttp://quotes.ino.com/chart/?s=CME_RMB.Z07.ELooks very thinly traded. BTW, anyone know of a free/cheap quote site with RMB NDF and NDO quotes?

Please try Reuters. Some big houses have dedicated pages for their NDF and NDSWAP quotes. However, it is not free/cheap.