Jermann, Urban J.; Wei, Bin; Yue, Vivian Z. - 2019
empirical findings suggest that a "two-pillar policy" is in place, aiming to balance RMB index stability and exchange rate … flexibility. We then develop a tractable no-arbitrage model of the RMB under the two-pillar policy. Using derivatives data on the … rate and sustainability of the policy. Our model is able to predict the modification of the two-pillar policy in May 2017 …