The Comparative Study Of Duration Model To Estimate The Accuracy Of China’s Bond Prices

In2000, the People’s bank of China announced the principles and plan of market-oriented reforms in China’s interest rate, which marks China interest rates liberalization reformofficially opened.With the deepening of the process of marketization of China’s interest rate, amplitude and frequency of fluctuations in interest rates will be increasing and the risks arising from changes in interest rates impact on the economy will become increasingly serious.As one of the important tools to measure interest rate risk, Duration models is becoming more and more important in the hedging interest rate aspect.However, the selection of the appropriate duration model is also an important sectionin building the hedging system of interest rate risk.Firstly, the research is starting from the term structure of interest rates.Through empirical analysis, we obtained the form of interest rate term structure and dynamic changes in trends.Then, according to the theoretical formula, we calculated the duration andtheory of price volatilityof the bond samples.Comparing with the theoretical price of the bond volatility and the actual price volatility, we analyzed the accuracy of the estimates of duration models for bond prices. Meanwhile, provide a reference for the selection of the appropriate duration model.According to the date analysis, we know that the accuracy of the estimates of F-W duration models is highest and better able to explain the actual price fluctuation trend. Through the empirical analysis of the term structure of interest rates, we know that China’s term structure of interest rates is non-linear form, and similar to upward parallel shift. The establishment of the F-W duration model is based on nonlinear interest rate term structure and only the upper and lower parallel. Therefore, the conclusion of data analysis has been theoretically verified. The F-W duration model can better adapt to our current market, and the nonlinear characteristics of the term structure of interest rates has become an important factor to select the duration model.