Interest Rate Term Results Fitting Technology And Its Application

Interest rate term structure fitting techniques is a technique which usingthe known bond data fits a class of future interest rate curve. The interest ratecurve has fitted can used not only on the pricing of securities and theirderivatives and risk management at the micro level, but also to provide a basisfor the country developing macro-policy at the macro level. Now the termstructure of interest rates is lagging behind in China, therefore a more detailedexposition and introducing how to combine it to the actual application hassome practical significance of the term structure of interest rates fittingtechnique.1. Taking parameter model Svesson model as foundation, use freeparameter selection technology based on genetic algorithm to solve the modelparameters. Using Svesson model to study bond spread phenomenon in thedifferent market, evidence shows that the spreads on government bonds in thedifferent market does exist, market segmentation, the investor’s expectations,macroeconomic policy and delivery manner and other factors lead to thespread causes.2. According to CIR three factor interest rate affine model, using the Calman filter-maximum likelihood estimation method to solve the modelparameters, and then using Monte Carlo simulation on bond option pricing;empirical evidence shows that the bond option price is related to the bondprice, the option exercise price and the exercise suspension period of an option,options for the same bond as increasing of the implementation period the priceappreciation is approximately constant, the value-added size is related to theremaining term of the basic bonds given, the longer term the smallervalue-added; Compared the spot rate curves fitted out of using static interestrate term structure fitting technique and dynamic interest rate term structurefitting technique, found that the use of static fitting technique was more in linewith China’s actual interest rate curve.3. Based on the Hazen investment cash flow theory, establish the revisedinternal rate of return and net present value formula. On this basis, using thespot rate by adding the risk premium curve instead of a constant benchmarkinterest rate to improve the model, using the entropy of the stochastic cashflow measure of cash flow uncertainty, the improved model can moreaccurately calculate the net present value of cash flow, the investment netpresent value and the internal rate of return based on the NPV to make theresults more realistic. Traditional payback period have a significant drawbackthat did not consider the project cash flow distribution, to this problemduration of the project payback period formula can be a good solution, Usingthe spot rate curve and risk premium as the benchmark interest rate curves correct the recovery period formula of the payback period based on bondduration, and gives the relevant empirical study.