Technical Annex: TAR Models and Estimation Results
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This working paper uses information up to April 2013.
The reversal index is defined as the implied volatility for call options minus the implied volatility for put options on the base currency with the same delta. It can be interpreted as the market view of the most likely direction of the spot movement over the next maturity date.
A number of variables turned out to be statistically insignificant and, thus, are not reported, notably the difference between the onshore three-month forward rate and the three-month NDF, used as a proxy for expectation of futures changes in the basis.
QFII scheme allows specified foreign investors to make portfolio investments inside Mainland China while QDII scheme permits Mainland investors to make portfolio investments outside Mainland China.