Application Of Two Factor CIR Model In Interbank Bond Repurchase Market

Interest rate,as an important economic variable,is the focus of attention in financial circles.Therefore,the study of term structure of interest rate has been one of the hot topics in financial engineering.Whether the pricing of financial assets in the micro economy or the formulation of various economic policies such as monetary policy in the macro economy can not be separated from the application of the term structure of interest rates.Generally speaking,the level of interest rate should be determined by the market,and marketization of interest rate is a way to allocate resources effectively.Because the financial market of developed countries such as Europe and America started earlier and various systems were more perfect,the marketization level of interest rate was relatively high.By contrast,Although China has not reached the level of developed countries at present,since the reform of interest rate marketization,the central bank of our country has gradually relaxed its control over the interest rate market.In the near future,China's interest rate liberalization will reach a higher level.In the past,how to use the yield curve to carry on the effective pricing has been a hot issue discussed by many experts and scholars.The classical research idea of this problem is to calculate the implicit spot interest rate data by constructing the static interest rate term structure model,and then to estimate the dynamic interest rate term model by the spot interest rate data.Finally,we'll take stock of what's going on.The model is applied to the bond market and the corresponding pricing error is obtained.This paper studies this problem from a relatively new angle.The theoretical part of this paper mainly introduces four classical theories of term structure of interest rate and various common static and dynamic term structure models of interest rate.In the empirical part,the derivation process of Kalman filter equation and the main content of two-factor CIR model are discussed in detail.The main content of this idea is to establish the dynamic interest rate term structure model based on the interbank pledge repurchase market and to apply it to the long-term market,aiming to study the short-term market and the long-term market deeply.The relationship between markets.The specific flow is as follows: firstly,the dynamic model is built by pledge repurchase data,and the initial pricing and the pricing error are summarized by this model,and then the error correction and the quadratic pricing are carried out by logarithmic transformation.Then the results of the two pricing processes are compared and analyzed.Finally,the validity of the dynamic interest rate term model and error correction is tested by using different national debt data and recursive methods.The empirical results show that: first,the trend of interest rate changes in the pledge repurchase market is similar to the implied spot interest rate trend in the treasury bond market;second,through factor analysis,we find that the first two reasons The sub-system can extract most of the information from the original data,so it is appropriate to establish a two-factor CIR model.Thirdly,the error rate of using the interest rate data of the pledge repo market to establish the CIR model and carry out the initial pricing is relatively high.Logarithmic transformation can better correct the errors in initial pricing.Fifthly,by pricing different bonds and recursively pricing the model,we find that the correction effect of logarithmic transformation has good stability.