Research On Term Structure Of Interest Rates In China Based On Jump Ckls Model

In recent years the term structure of interest rates has been a hot topic to study the international financial market; it is an important theory basis of asset pricing, financial product designing, the interest rate risk management etc. Researching the interest rate term structure nowadays is still of great significance. In the study of this topic, the main idea of my article is as follows:The first is the choice of the term structure of interest rate model. This article has compared the current theory of several important term structures of interest rate models, and ultimately chooses CKLS model as the research object of this paper. Then the part combines with the characteristics of the Chinese interest rate market and adds a jump factor into the CKLS model. In this part, the innovation point of this article is that most scholars assumed that in the specified time interval the jump only happens once, but this research highlighted that the situation within a specified time interval the jump has occurred many times and the number of the occurrence of hops obeys Poisson process.The second part is to solve the model transfer density function. Since the model used in the paper is very complicated, we cannot find out the closed end solution of transition density function of the jump CKLS model, so in order to estimate the transition density function, which also can be understood as the conditional density function, making a discrete for the model is used,. In the choice of discrete method, this paper chooses the Euler discrete method, which is the most common discrete method. The density function obtained in this part makes an important foundation for the next solution of likelihood function, which will used in the MCMC parameter estimation in next part.Finally is the parameter estimation and empirical analysis. In the section, this paper adopts MCMC method which based on Bayesian theorem as the main estimation method. During using the MCMC method it has repeated many simulations and then obtained the basic statistical characteristics of the model’s each parameter, also it has obtained the kernel density graphics and quantile graphics of each parameter’s estimation and ultimately selected the mean of simulation results as the parameter’s really value. In the aspect of the selection of data, this paper combines the characteristics of Chinese interest rate market, analyzing the characteristics of LIBOR in all varieties of the Bank of Shanghai, and finally selecting the Shanghai interbank overnight interest rates as the representative of financial market interest rate. In the process of parameter estimation, this paper has used the MCMC method to make simulation for likelihood function which is calculated in Euler discrete method, and using the obtained results as the object of analysis to analyze the empirical results.