Journal of Mathematical Finance

Volume 5, Issue 1 (February 2015)

ISSN Print: 2162-2434   ISSN Online: 2162-2442

Google-based Impact Factor: 1.39  Citations  

Testing Continuous-Time Interest Rate Model for Chinese Repo Market

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DOI: 10.4236/jmf.2015.51003    3,019 Downloads   3,958 Views  Citations

ABSTRACT

This paper tests the popular continuous-time interest rate models for Chinese repo market to address what and how the interest rates change with the marketlization in China. Using Bandi [1]’s method, we get the functional nonparametric estimation of drift and diffusion terms and the local time of the process. We find that the interest rates of China during the period from 1993 to 2003 are bimodal distributed and propose a two-regime model which can fit the data better. We also study the probabilities that the process will stay the two regimes respectively and its transition probability that the process transfers from one regime to another regime.

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Zhao, H. and Peng, F. (2015) Testing Continuous-Time Interest Rate Model for Chinese Repo Market. Journal of Mathematical Finance, 5, 26-39. doi: 10.4236/jmf.2015.51003.

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