Transmission Of Information Of Interest Rate Term Structure

Since 2000, a large number of finance literature started to focus on the financial market information extraction research, a new perspective of financial research evolved, an increasing number of studies have focused on the "future information e reflected in the price of financial instruments." After the global financial tsunami triggered by The Wall street of U.S.A, people find a profound study of the financial market messaging is more and more practical and urgent. Modern term structure of interest rates is considered not only the core of the pricing of financial assets, but also the connection of micro-finance and macroeconomic bridge. Therefore, this article attempts to study along the road opened up by our predecessors, regard the transmission of information the term structure of interest rates as the topic of this research direction, and try to enrich and expand it,In this paper, firstly, we give a systematic review of the theory evolution of the term structure of interest rate process, from both the micro and macro perspective, to explain the function of term structure of interest rates for asset pricing, hedging and risk management, arbitrage,, and the function of connecting the money market and macro-economic. After using a variety of methods for static yield curve term structure of interest rates, further analyze the message that morphological characteristics of the yield curve itself convey, such as future interest rate expectations, duration immunization, Liquidity Premium and VaR.On this basis, we study the information transmission in term structure of interest bonds and options rates pricing, analyze the application of the risk-neutral probability density function in the transmission of information of financial asset prices;and further analyze the CIR model in simulate dynamic interest rates, price the floating rate bonds and puttable/callable bond pricing, compare the difference message between the actual price and model price. In the part of derivatives pricing, we focus on credit default risk and interest rate options.In stock market, through CAPM model, we described inherent logic of the relationship between the term structure of interest rates and stock pricing. Next,, we do some empirical studies respectively in the impact of the term structure of interest rates in bond market,deposit interest rate and international interest rate to China's stock market index yield fluctuations. Here we found a very interesting phenomenon, the influence of bond market interest rates and foreign market interest rate to stock market index returns are almost negligible, but the impact of deposit interest rates is great than expected, we tried to explained this phenomenon.When we study the term structure of interest rates in domestic macro-variable transmission of information, we firstly analyze the major macroeconomic model in order to identify the internal logic between term structure of interest rates and macroeconomic variables, and then test the forecast capability of term structure of interest rates on economic growth, inflation and other information. Our research found that the explanation ability of term structure of interest rates for China's GDP, investment and other factors are very limited. But it can explain the consumption of C, as well as the CPI changes very well. Information transmission of monetary policy is the core of the term structure application. Our research proved this point, the interest rate term structure contains a wealth of monetary policy implications, not only can be used as an intermediate target of monetary policy, but also can be used to assess the monetary policy the implementation of the results. Finally, the article made a comprehensive analysis on the impulse response of domestic macroeconomic variables through VAR model of the term structure of interest rates.In an open economy, how does term structure of interest rates reflect and transform the effects of external shocks is a major focus of our study. We draw the following conclusions:(1) Domestic market interest rate term structure is vulnerable to U.S. monetary policy; (2) Domestic Implied interest rate can pass the RMB exchange rate information. If the implied RMB one-year and five-year non-present Gold delivery swap (NDS) is lower than financial bonds interest rate in the same period, The greater spreads reach, the more intense appreciation of the RMB is. On the contrary, it is to ease pressure on RMB appreciation; (3) The External shocks impact for long-term interest rate is significantly less than short-or medium-term interest rate; (4) The impact of external real economy factors to China market interest rates, other than oil, is relatively smaller than monetary factors.