Study On Dynamic Conditional Correlation Of Inter-bank Offered Rate In China

Term structure of interest rates is a hot issue in the Finance and Economics, which is the benchmarking in asset pricing, financial product design, risk management, which is also transmission mechanism of controlling short-term interest rates to influence the long-term interest rates. Does the term structure research on Inter-bank market and on its function on the monetary transmission mechanism have important theoretical and practical significance.First of all, thesis about the term structure of interest rates in domestic and foreign were reviewed and then the Vasicek model, Multivariate GARCH & the testing of Structure Change were be well presented. Then, selected four series that are the monthly average data, which maturities are 1day,7days,30days and 90days since the steady development stage in China inter-bank offered rates (CHIBOR).Through the statistical and heteroscedasticity variance analysis, found Interest rate date exist obvious peaks, thick tails and conditional heteroskedasticity phenomenon. Therefore selecting VECH, diagonal BEKK, CCC-GARCH and DCC-GARCH method estimate the parameter of single factor Vasicek model. On the basis of the results, using the endogenous structure change model test the dynamic conditional correlation.①Estimated the mean equation indicate that 1) China's interest rate data have obvious mean-reversion phenomenon,2) the mean reverting speed of interest rate accelerates with the increase of the maturity of interest that in line with the theory of term structure of interest rates set, but except maturity is 90s interest rate data has the slowest mean reverting speed, the reason is that the main inter-bank offered "prudent" lending behavior.②Estimated the variance and covariance equation indicate that When all of the interest rate by external shocks, the existence of Inter-bank interest rate fluctuations in long-term effectiveness,at the same time, the decay items are more affect than the information items.③Testing the structure change of DCC span in the sample's date showing that the correlation have the increase trend between each term interest, which to some extend that reflects the Inter-bank market interest rate formation mechanism has been further improved in our country, Also found that the adjustment of monetary policy to bring about structural change in the correlation coefficient, In particular, Frequent adjustment of monetary policy have caused the correlation between interest rates were very big , and the correlation parameters of interest rate have been changed with co-movement since the U.S. financial crisis. This fully indicates that the efficiency of Inter-bank interest rates transmitting the monetary policy has been improved.