Interest Rate Term Structure:Theory And Empirical Analysis Based On Chinese Data

As the link of merchandise and money market, interest rate plays a pivotal role in the modern economic and financial management. It’s the most important basis of financial product pricing, financial organization risk management and economic prediction and analysis. Interest rates term structure is relationship between the different non-risk interest rates and its maturities, it have important theoretical and practical research meanings.In theory area, as an important macroeconomic variable,the dynamic mechanism of interest rate, the cause and information contained in the term structure change, have important theoretical value in the macroeconomic, In practice area, the problem of weather the central bank benchmark interest rate or the reserve ratio adjustment could really influence the middle and long term interest rate which truly act the real economy can be achieved, the effect of Operation Twist (OT) which once applied by western central banks, need to be researched deeply by policy makers. Meanwhile, the core of earnings of financial institutions, particularly for highly leveraged financial institutions such as banks, is maturity mismatch of assets and liabilities, therefore, banks need to pay close attention to changes in term structure. For the ordinary business, and even our common residents, tterm structure has some impacts on its investment and financing, consumer decision-making.In the background of Chinese interest liberalization and booming of interest rate derivatives markets, this paper will examine the static estimation of the term structure, the characteristics of its dynamic changes, the relationship between changes in the term structure and macro economy, those are important for macro financial research, monetary policy making and financial institutions risk management.This paper introduces the basic concepts of the interest rates term structure, and sets out the context of the development and research status of the its theory around the world. The second chapter describes how to obtain interest rates price information from market trading bonds, and before this, we briefly describe the main types of Chinese interest rates (bond) market, different type of interest rates. Because we extract the term structure information from bond price in this article, therefore, in the second chapter, we will also describe the basic pricing principles of financial assets, the no-arbitrage pricing, risk-neutral pricing theory, this is the foundation of modern asset pricing theory,and also the foundations of Chapter V, VI’s empirical model.in this article.As the theoretical grounds for following Chapters, Chapter III shows the development of a more detailed context of the theory of the term structure, including the modern interpretation of the traditional theory of the term structure, authentication methods, and we will test those traditional theories with China’s bond market data. This chapter will also describes the remaining length of a step by step development process of the modern theory, from equilibrium models of the beginning of the 1970s to the affine model sprang up at the beginning of this century.History through the development of the term structure, can be more profound understanding of the latest model, a clearer direction to improve the understanding..Term structure analysis’s premise is to obtain information of the term structure, the fourth chapter will study the static estimation of the term structure, and focuses on the selection of the way when the weighted cubic spline method to estimate the term structure,.We proposed a "Quasi-duration" and "Volume rankings"weighted concept. Use bond data from 2009 to 2013 in the interbank market, the paper compares the differences between the different weighting methods in estimating the term structure, the result shows that the "Volume rankings"weighted has a better performance than other methods in out sample and in sample predicton.In chapter V, firstly, we analyzes the drivers of change in short-term interest rates, then, wu use the Diebold-Li model and principal component analysis to research the conponents of the dynamics of the term structure. And then, use simplifying basis macro-financial model, to empirically analysis i the term structure of the interest rate spread and macroeconomic variables.In chapter Six, under conditions of no-arbitrage restrictions we use affine term structure models to in-depth study the relationship between macroeconomic factors and term structure dynamics. The result shows that, compared with non-cross section restriction model, the coefficient in no arbitrage model is smaller, it means inflation and economy activity level have petty influence on term structure’s dynamic in no arbitrage affine model.In this paper, the static estimation of China’s bond market term structure of cubic spline method, composition and use of affine term structure model to analyze the relationship between macroeconomic and other aspects of the term structure of the dynamic changes were made some innovation.