Term Structure And Interest Rate Risk Management In Chinese Bond Markets

In recent years, the issuing scale of Chinese government bond has been expanded for many times. The bond market plays a more and more important role in the national economy. While in China, people pay much attention to the equity market and there is little research about bond market. With the reality of Chinese bond market as the base and the overseas' research as reference, this thesis does a comprehensive analysis of interest rate dynamics and risk management on Chinese bond market. Firstly, the existing term structure models of interest rate and the duration approach in the interest rate risk management are reviewed. In this section we analyze the characteristics, applying range and the correlation of different models and the duration models under various term structure models such as Vasicek, CIR, HJM and Moreno model, etc. Then, based on interest rate data of Chinese bond market, we take account the impulse-response effect, jump effect, regime-switching effect and stochastic volatility effect into the empirical study of term structure model of interest rate. We find that due to the fact that the Chinese bond market is still an emerging market, the variance of interest rate is far more variety in China than for other mature market in developing countries. Such excess variety indicates that a healthy and orderly exchange mechanism has not come into being in Chinese bond market. So it becomes more and more important for us to do some research on risk management of interest rate. Finally, we apply the factor analysis of the interest rate risk factors that change the yield curve of bond. Based on the comparison of the static models and stochastic models, we bring forward a dynamic stochastic risk management model of interest rate. In addition to this, we conduct an empirical examination of the management of risk immunized bond portfolios.