Research On The Yield Curve And Arbitrage Strategy Of Inter-bank CDB Bond Market

In an effective market,from the micro level,the yield curve,as a reference for asset pricing,arbitrage,product design,risk management and so on,can help investors to manage their investments;at the macro level,it is both the current feedback of supply and demand,and also includes the market's expectation of future interest rates.It is closely related to China's macro economy.Moreover,with the interest rate marketization and the deepening of bond market in China,the yield curve model will play a greater role in the market.This paper hopes to study and analyze the yield curve of the inter-bank CDB market model and develop the yield-curve arbitrage strategy.This paper mainly studies the yield curve based on the Dynamic Nelson-Siegel model(DNS).The paper selects the data from 2016 to 2017,uses python programming,and fits the model within the sample and Out-of-sample prediction.In this model,it discusses the variation of the three factorsLt,St,Ct.The results show that the horizontal rate,slope and curvature corresponding to the Lt,St,Ct can be compared with the 30-year,2-month,and 3-year realities of the China Policy Financial Debt Market.According to the results,prolonged immunization strategy is formulated,constructing a bond portfolio allows the price effect of the entire portfolio value and the reinvestment effect to hedge.The traditional duration form is extended to the vector form in this model,use the interaction of horizontal rate,slope and curvature factor to hedge interest rate risk arising from changes in the yield curve structure.The back test results show that the strategy can obtain better returns and provide good advice for investors in market.