NDF Volatility

yandong2020 · November 29th, 2008, 1:54 am

I'm a beginner in Asian currency offshore trading.. I've found that the realized volatiltiy of the offshore NDF is higher than the onshore currency trading, what's the driving power behind?Is it just b/c : 1) the NDF market is not arbitragiable w/ the on shore market 2) most participants are speculators THanks!

pcg · November 29th, 2008, 3:58 am

MAYBE BECAUSE THE REGULATORS HAVE NO CONTROL OVER ndf AND VIEWS THAT CANNOT BE EXPRESSED ONSHORE GO OFFSHORE..

yandong2020 · November 29th, 2008, 5:26 am

Thanks pcg! That only means the NDF market should be more liquid and with more participants.. But still, why is the volatility heightedn?...

daveangel · November 29th, 2008, 9:40 am

the NDF market will be more volatile because quite often (and I think I can guess that you are talking about CNY) the spot exchange rate is managed (or pegged) by the government. Hence, the NDF market will express the true level of volatility of the rate

yandong2020 · December 4th, 2008, 12:21 pm

Thanks daveangel! I guess you are right.