The Research On The Optimal Estimation Of The Term Structure Of Interest Rate And Its Application

Term structure of interest rate, which is also called the yield curve, plots a set of yield to maturity of the zero-coupon bonds with different maturities. It is the benchmark for asset pricing, financial product design, hedging, risk management, arbitrage and speculation. Therefore, the research on term structure is always a basic research in finance field. With the development of the financial market and the introduction of different financial derivatives, it is very urgent and significant to speed up the research on the term structure.In this dissertation, firstly the author reviews the literatures on term structure; analyzes the related theories and models from three perspectives, i.e. the term structure formation hypotheses and the tests, the static estimation of the yield curve and the dynamic models of the term structure. Then the author continues the research from the angle of the optimal static estimation of the term structure. Because there exist great liquid differences between the market of the developed countries and developing countries, the author puts forward a framework which is appropriate to the estimation of the yield curve in the illiquid market. After this, the author defines the optimal estimation indexes from the perspective of the government bonds investors. In the empirical part, the research compares seven different methods to the estimation of the term structure from five angles by making use of the bonds'prices data in the Shanghai Stock Exchange(SSE) market. After the comparison, the research finds that the exponential spline method is the optimal. The exponential spline method not only has the explaining ability concerning to the in-sample data, but also has the forecast ability concerning the out-of-sample data. The stability and robustness of it is very high. Then, the author focuses on the research of the optimal dynamic model of the term structure. At the basis of the analysis of the dynamic behavior of the short rate, the paper puts forward a nested model including the GARCH, Jump and level process. The evaluation indexes are also defined. In the empirical part, the R091 interest rate market of the SSE is used as empirical object. The research compares the nested model form the perspectives of the in-sample ability to explain, the out-of-sample ability to forecast, the test of the likelihood ratio and the graphs of the unconditional probability. After the comparison, the author finds that the GARCH-Jump model is the optimal dynamic model of the term structure. In order to describe the dynamic behavior of the R091, the...