Studying Term Structure of SHIBOR with the Two-Factor Vasicek Model

With the development of the Chinese interest rate market, SHIBOR is playing an increasingly important role. Based on principal component analysing SHIBOR, a two-factor Vasicek model is established to portray the change in SHIBOR with different terms. And parameters are estimated by using the Kalman...

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Bibliographic Details
Published in:Abstract and Applied Analysis 2014-01, Vol.2014 (2014), p.431-437-844
Main Authors: Ma, Chaoqun, Lan, Qiujun, Liu, Jian
Format: Article
Language:English
Subjects:
Derivatives
Economic models
Filters (Mathematics)
Forecasts and trends
Hypotheses
Interest rate swaps
Risk premiums
Studies
Yield curve
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Summary:With the development of the Chinese interest rate market, SHIBOR is playing an increasingly important role. Based on principal component analysing SHIBOR, a two-factor Vasicek model is established to portray the change in SHIBOR with different terms. And parameters are estimated by using the Kalman filter. The model is also used to fit and forecast SHIBOR with different terms. The results show that two-factor Vasicek model fits SHIBOR well, especially for SHIBOR in terms of three months or more.
ISSN:1085-3375
1687-0409
DOI:10.1155/2014/539230