Constructing Of Bond Term Structure And Pricing Of The RMB Interest Rate Swaps

Term structure of interest rates, which can provide foundation for investorsand fnancial regulatory authorities, is a basic tool of researching the bond market.Although in history many scholars have put forward many diferent methods of con-structing term structure of interest rates, there are still many problems in practicalapplication, such as forward rates being negative, ftting curves not meeting the lo-cality and the like. Describing term structure of interest rates properly is profound.Therefore, in this paper we will introduce a new interpolation method proposed byHagan and West, which can be used to construct term structure of interest ratesabout chinese bond market and analyse the pricing of RMB interest rate swaps.We will mainly adopt theoretical and empirical methods to analyze the con-structing of term structure about chinese bond market and the pricing of RMBinterest rate swaps. In the introduction, we introduce background, research signif-icance and progress in the domestic and foreign. In chapter two, we discuss somecommon interpolation methods, and point out its defciencies. In chapter three, weintroduce the monotone and convex spline, and use it to construct term structure.Meanwhile, we also illustrate the superiority of this method. In chapter four, we useconclusions of the third chapter to test and verify the pricing of RMB interest rateswaps. In chapter fve, we summarize the main results of this article and give someproblems that need further efort.