Dynamic Characteristics Of Private Lending Rate Term Structure

Private lending interest rates monitoring by the people’s bank of Wenzhou shows u-shaped interest rate term structure, which have significant differences with formal financial market’s upward-sloping term structure of interest rates.Specifically, short-term interest rates limited within1year has the abnormal characteristics that longer-term interest rates lower than short term interest rates, while the term structure of interest rates of more than one year is upward.This upside down interest rate term structure in short term appeared many times in our sample period, which means maturity structure inversion phenomenon is widespread in this informal lending market.Therefore, this article take Wenzhou as an example, analyzing the characteristics of the private lending interest rate term structure and dynamic features by using interest rates model.This research could help people understand the changing rule of the private lending interest rates better and it will contribute to the perfection of financial market in China. And on the basis of the dynamic model,the regulators could manage private lending interest rates risk in quantitative.At first, this paper analyses the shape of Wenzhou private lending interest rate term structure. And combining with the theory of term structure of interest rates, explain factors that affect the abnormal shape. And then, through the empirical analysis, we draws the dynamic characteristics of Wenzhou private lending interest rates and obtain the fitting model. Finally policy recommendations are put forward to reduce the fluctuations of private financial interest rates interest in our country from the perspective of perfect private lending market and guide rational investment.Main conclusion is:(1) The private lending interest rate term structure shows U-shape, short-term interest rates upside down, distribution of interest rates is characterized by obvious right avertence and sharp peak and heavy tail.(2)average resilience is only found in interest rate time series within one month.(3)conditional heterosce dasticity and level effect are significant in rate time series that period for1to6months, as well as6to12months, while the other two class period rates are not significant of these two features.(4)The horizontal effect is significant in all the four time series, while the external information impact effects are all not significant.(5)On model fitting, The dynamic characteristics of lending rate borrowing period within1month,6-12months and more than a year can be characterized by basic CKLS model.And the dynamic characteristics of lending rate borrowing period in1-6months can be described by CKLS extension model embedding nonlinear drift factors and GARCH model.(6) parameter estimate of GARCH (1,1) is not stable in fitting of the private lending interest rates.