China Interest Rate Term Structure Theory And Empirical Analysis

The issue of interest is one of the most important topics of the financial market.Almost all of the financial phenomena have relationship with it.And the theory of term structure of interest rate is the key theory to explain the behavior of interest.The traditional theory of term structure of interest rate majors in researching the tendency of long term interest rate with return rate curve being the key instrument.With the development of financial market and the enrichment of financial instruments, the short-term interest rate has been considered as a fundamental determinant economic variable because it directly affects the pricing models of financial products and the effective risk management.Foreign researchers have developed and estimated many term structure models of interest rates.Unfortunately,the existing research of interest rate term structure in China is still staying in introduction and qualitative analysis.Most of the methods are simple regression.Especially the modern theory and methods haven't been applied to China.This thesis tries to find a new way of quantitative analysis for Chinese Treasury bond interest rate term structure by analyzing the difference of researching method for term structure between China and some developed countries.In order to combine the reality of China with modern method,this thesis probes into a fitful modelling method of Chinese Treasury bond interest rate term structure.Firstly,this thesis studies the law of dynamic movements of the spot rate and benchmark system in China and then expatiates the theory of term structure of interest rate.In this thesis,the author develops a common structure of all the genre of this theory.Secondly,the author introduces the most updated development in this field------the hedge and random process analysis method.It can also be called random process equilibrium model.Actually,the random process model is the artery method of research for term structure in foreign countries.And it is the emphasis of development of term structure theory and the basis of the theory.The author introduces this model and gives out a mathematic deduction.Thirdly,the author collects all the materials about the term structure modelling in China and appraise each of these term structure modeling method used by Chinese researchers.The Chinese academe currently emphasize modelling and regressing the return rate curve,but in these two years they turn to research the term structure by random model.In the remaining part,the author enumerates the matured return rate using his own method and put these data into four main models which are used by Chinese academe and test which one is the most appropriate model to simulate Chinese Treasury bond interest rate.To unify two different thoughts ,the author uses the difference serials of interest rate between long-term bond and short- term bond because the difference can explain the shape of return rate curve to some degree.And then the author uses the high frequency data to erect the model.Having tested many times,the author finds that GARCH model can be the most fitful model for the difference of long term and short term interest rate.However, the even more complicated model---GARCH-M cannot match the data ideally.Finally,the author summarizes the characteristics of Chinese Treasury bond interest rate and raise some suggestions.