Three-Frctor Vasicek Model’s Demonstrating Research Into Interest Term Structure Of Submitted National Debt

Interest term structure refers to the relationship between different interests of term public debt and mature term on a certain point. As the most basic and key variable in contemporary marketing economic and financial society, interest is also the basis of asset evaluation, value maintaining and risk management. Interest term structure includes both static and dynamic theories.At the beginning, the paper analyzes the background and significance of interest term structure of public debt. Besides, it summarizes the research state about interest term structure home and abroad. In the second chapter, the writer first introduces the traditional theory of interest term structure and then employs the Vasicek Model to deduce. Chapter Three expatiates the estimating methods of both static and dynamic for three-factor Vasicek Model.In the part of demonstrating research, the writer first employs double time variable parameter Nelson-Siegel model to produce data for immediate interest. With the analysis of each interest, the conclusion that three-factor model can almost describes the dynamic features can be drawn. What’s more, based on the immediate interest, the parameter of three-factor model can also be worked out by Calman filter. At last, according to the data of root mean square error, the writer finds that the model is accurate to the immediate interest, particularly three-year, four-year, and five-year ones, but not to one-year one. The model date worked out with Caiman filtering method is almost the same with the actual one. Therefore, three-gene Vasicek model can exactly describe the dynamic features of the market interest term structure for the public debt in China.