The Research About Chinese Inter-bank Bond Market Short-term Interest Dynamic Behavior

In this dissertation, we will discuss the price discovery of the Chinese inter-bank short term interest rate, under the fundamental researches on dynamic interest rate term model. The main contents of the dissertation are as follows:Firstly, we establish a well-defined dynamic model DCC-GARCH that combines the short term interest rate, CPI, M2 and GDP, by the results of analyzing the relations between the macro-economic variables and short term interest rate. Then, we introduce Markov Switching Model to depict the Chinese Economic cycle pattern and Regime-Switching mechanism's change of short term interest rate.Secondly, building on theoretical results for bi-power variation measures, the jump behavior of realized volatility for inter-bank repo interest rate is examined. Realized volatility is divided into two parts: the continuous sample path variation and the discontinuous jump variation. The statistical feature of jump variation is studied, the result indicates that jump component of quadratic variation is the most important determinant for realized volatility. Based on this, the conclusion shows that there is more unique characteristics of jump and realized volatility than Foreign markets and the pattern of jump of are contributed to a variety of factors.Thirdly, based on the market microstructure theories, the impact of asymmetric information on repo trading is analyzed directly. It is represented that the price system can be viewed as information dissemination system, and price, trade (including trade size, direction and time), and the effect of trade on price are all informative. Taking the trading duration, trading volume and price volatility into account, this paper firstly introduces a new approach of measuring intraday pattern by introducing UFH GARCH model.Lastly, using MRR model, we estimate the component of bid-ask spread in China inter-bank bond market, and made the results more reliable. The results show small evidence that the adverse selection and inventory cost exists. The cost underlies bid-ask spread mainly dues to inventory cost and order processing. Based on this, the evidence show that the inventory cost of market maker mainly comes form its funding liquidity.