An Empirical Study On The Fluctuating Relationship Between Chinese Interbank Lending Market And Stock Market As Well As The Application In Measurement Of Interest Rate Risk

Interbank lending market and stock market are important parts of China's financial market.Interbank lending market is a part of the money market and stock market is a part of the capital market.Money market and capital market are both based on financial transactions.Capital flows from one market to the other will inevitably lead to the correlation between the two markets.Survey on the fluctuating relationship between the two markets can provide the basis for market forecasts and government policy.The main purpose of this study is to analyze the fluctuating relationship between Interbank lending market and stock market.What's more.Combined with Monte Carlo simulation method,the VaR of interest rate risk is estimated.Firstly,this paper analyzes the fluctuating relationship from four perspectives:the function of commercial bank and capital market,the transmission mechanism of monetary policy,the conversion between equity and currency of residents and the business model of financial institutions.Secondly,this paper selects logarithmic day-earning ratio as a representative of the fluctuation of each market,the time span is October 10,2006 to June 12,2015,a total of 2111 data.The modeling process is mainly divided into two steps:edge distribution estimation and copula estimation.In the modeling of marginal distribution,this paper establishs a GARCH(2.1)-GED model for the logarithmic day-earning ratio of overnight Shibor and a GARCH(1,1)-GED model for the logarithmic day-earning ratio of Shanghai Composite Index by comparing different GARCH models;in the choice of Copula function,by comparing different kinds of Copula functions,the results show that time-varying Gaussian Copula function fits best,suggesting that interbank lending market and the stock market do not have obvious upper tail or lower tail correlation,that is to say that the tail of the distribution of the two markets is asymptotically independent.In the estimation of interest rate risk VaR,this paper compares the two cases of the GARCH model and the GARCH-Copula model.The results show that the effect of GARCH-Copula is better than that of the GARCH model.Finally,on the basis of theoretical analysis and empirical research,this paper makes several policy recommendations on the development of financial markets,that is to strengthen the connection between currency market and capital market,and continue to regulate and develop the interbank lending market and the stock market.