Interest Rate Term Structure And Interest Rate Risk Control

This thesis consists of two parts. The one is about the term structure of spot rate in Chinese Treasury bond market. The other is about interest rate risk management. Studying the law of dynamic movements of the spot rate in Chinese Treasury bond market is helpful to the establishment of a floating interest rate and benchmark system in China. Financial mathematicians in some developed countries, such as USA and UK, have done considerable research on their national benchmarks and the short-term interest rate, suggesting a large number of mathematical models. For example, since the first ARCH model introduced by Engle (1982), its various extensions keep emerging one after another, such as GARCH, ARCH-M, EGARCH and AGARCH models and etc., all those models are called ARCH family models. With rapid development of the financial market in China, more and more people have become intrigued by the study of the floating interest rate in Chinese Treasury bond market. The paper manages to put in GARCH model of spot rate in Chinese Treasury bonk market.The second half of this thesis is devoted to controlling interest rate risk. Because of the importance of state-owned commercial banks in our nation economy, the paper focuses on controlling the interest rate risk existing in them and puts in some strategists.The paper is composed of four chapters: Section one introduces basic concepts and definitions related to interest rates and the theory of interest rates. Section two contains a brief review of existing stochastic term structure models, both continuous and discrete ones, introducing in details ARCH and GARCH. It also put in the GARCH model of spot rate in Chinese Treasury bonk market. Section three discusses the method of interest rate measurement and immunization. Section four puts forward several count measures of interest rate risk existing in state-owned commercial banks. The last parts of the paper are appendixes and references.