Stochastic Interest Rate Model And Its Empirical Analysis

Interest is important in asset pricing and risk management. Theory of interest mainly concerns about the traditional financial theory and modern mathematical theory, the latter is divided into the theory of term structure of interest rate and stochastic interest rate model. For different interests, different models have different application, so it is a foundational problems in financial sector.First of all, we introduced some related theory of interest, the market of interest, the mathematical theory of market interest and their practice methods. The article discussed Shibor. Besides the Vasicek model and CIR model, exponential Vasicek model are also discussed. We got results and found out the fittest model. In addition, we discussed the relationship of discount factor and the risk neutral pricing.The main meaning of this paper is to discuss the Shibor interest rate which has a basic position in Chinese financial market. We find out the fit model for Shibor while previous articles always talk about Bond interest rate.