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| Autores principales: | , , , |
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| Formato: | Preprint |
| Publicado: |
2026
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| Materias: | |
| Acceso en línea: | https://arxiv.org/abs/2605.25392 |
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| _version_ | 1866917530610696192 |
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| author | Drapeau, Samuel Luo, Peng Tao, Xuan Wang, Tan |
| author_facet | Drapeau, Samuel Luo, Peng Tao, Xuan Wang, Tan |
| contents | Partially convertible economies face a market-design problem: trade integration, cross-border investment, and domestic balance-sheet exposure increase the demand for currency hedging before full financial integration is complete. China adopted a distinctive architecture for this problem by fostering a deliverable offshore Renminbi market (CNH) alongside the segmented onshore market (CNY), rather than relying only on non-deliverable forwards. This creates two venues for closely related claims on the same currency. Spot prices are tightly linked, yet CNY and CNH forwards display a persistent and economically large discrepancy. We study that discrepancy in a joint equilibrium model for spot and forward trading with transaction costs and segmented supply. In the benchmark case with common constant supply and deterministic costs, spot parity implies a forward differential with the wrong sign relative to the data. Random offshore stress, modeled as a jump in trading costs, overturns this benchmark while preserving tight spot parity. The model yields a semi-explicit representation in the CNY/CNH application and a calibration of the observed forward discrepancy in terms of the market-implied likelihood and severity of offshore liquidity stress. |
| format | Preprint |
| id |
arxiv_https___arxiv_org_abs_2605_25392 |
| institution | arXiv |
| publishDate | 2026 |
| record_format | arxiv |
| spellingShingle | One Currency, Two Forward Prices: The Onshore-Offshore Renminbi Puzzle Drapeau, Samuel Luo, Peng Tao, Xuan Wang, Tan Mathematical Finance 91B50, 60H10, 91G20, 91B24 Partially convertible economies face a market-design problem: trade integration, cross-border investment, and domestic balance-sheet exposure increase the demand for currency hedging before full financial integration is complete. China adopted a distinctive architecture for this problem by fostering a deliverable offshore Renminbi market (CNH) alongside the segmented onshore market (CNY), rather than relying only on non-deliverable forwards. This creates two venues for closely related claims on the same currency. Spot prices are tightly linked, yet CNY and CNH forwards display a persistent and economically large discrepancy. We study that discrepancy in a joint equilibrium model for spot and forward trading with transaction costs and segmented supply. In the benchmark case with common constant supply and deterministic costs, spot parity implies a forward differential with the wrong sign relative to the data. Random offshore stress, modeled as a jump in trading costs, overturns this benchmark while preserving tight spot parity. The model yields a semi-explicit representation in the CNY/CNH application and a calibration of the observed forward discrepancy in terms of the market-implied likelihood and severity of offshore liquidity stress. |
| title | One Currency, Two Forward Prices: The Onshore-Offshore Renminbi Puzzle |
| topic | Mathematical Finance 91B50, 60H10, 91G20, 91B24 |
| url | https://arxiv.org/abs/2605.25392 |