An Research On The Dynamic Interest Rate Term Structure And Interest Rate Derivatives Pricing

With the accelerated process of the marketization of interest rate, The commercial banks have a strong will to hedge interest rate risks of assets and liabilities.obviously,the most effective tool to achieve this goal is interest rate derivatives.In this paper,the study of the interest rate derivatives mainly include the dynamic interest rate term structure and interest rate derivatives pricing theory.Recent empirical studies have demonstrated that dynamic behaviour of interest rate process can be better explained if ordinary diffusion process are augmented with jumps in the interest rate process. This paper studies the dynamic interest rate term structure of 7-day China interbank offered rates (CHIBOR07) using monthly data spanning 1997/01—2006/02,by the method of Markov Chain Monte Carlo.We conclude that the model without jump may be misspecified,and the model with jump can provides better explanation of empirical features of CHIBOR07.Under the affine-jump-diffusion setting, this paper also obtain the analytical expressions for interest rate derivatives respectively through Fourier transform by assuming the relationship at the maturing date,between the underlying asset and state variables to be two different types—affine or exponential affine.This paper further improve the work of Duffie,Pan and Singleton.