Option-implied volatility spillovers between onshore and offshore RMB exchange rates

Fengwei Yang, Lei Zhang and Meisha Zhang

Applied Economics, 2025, vol. 57, issue 25, 3397-3411

Abstract: This research examines the spillovers of option-implied volatilities between onshore and offshore RMB exchange rates from static and dynamic, symmetric and asymmetric perspectives during the period from November 2014 to December 2021. By employing the FIVAR-based connectedness approach, we find significant volatility spillovers between onshore and offshore RMB exchange rates, with the latter having a greater impact on the former. In addition, the spillover effect is time-varying and easily influenced by internal reforms and external shocks, such as the 8.11 RMB exchange rate reform, Sino-US trade frictions, and the outbreak of the COVID-19 pandemic. We further observe that the spillovers between the downside volatility are higher than that of the upside volatility, and the duration dominated by the downside volatility is longer. Our findings have important implications for policymakers and investors in risk management.

Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://hdl.handle.net/10.1080/00036846.2024.2337781 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:applec:v:57:y:2025:i:25:p:3397-3411

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RAEC20

DOI: 10.1080/00036846.2024.2337781

Access Statistics for this article

Applied Economics is currently edited by Anita Phillips

More articles in Applied Economics from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().