Modeling the dynamics of Chinese spot interest rates
AbstractUsing the daily data of Chinese 7-day repo rates from January 1, 1997 to December 31, 2008, this paper tests a variety of popular spot rate models, including single-factor diffusion, GARCH, Markov regime-switching and jump-diffusion models. We document that Chinese spot rates are subject to both market forces and administrative forces. GARCH, regime-switching and jump-diffusion models capture some important features of the dynamics of Chinese spot rates, but all models under study are overwhelmingly rejected. We further explore possible sources of model misspecification using diagnostic tests.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Elsevier in its journal Journal of Banking & Finance.
Volume (Year): 34 (2010)
Issue (Month): 5 (May)
Contact details of provider:
Web page: http://www.elsevier.com/locate/jbf
Spot rate models Term structure of interest rates Market segmentation Nonparametric specification tests;
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Hong, Yongmiao & Li, Haitao & Zhao, Feng, 2007. "Can the random walk model be beaten in out-of-sample density forecasts? Evidence from intraday foreign exchange rates," Journal of Econometrics, Elsevier, vol. 141(2), pages 736-776, December.
- Andrew Ang & Geert Bekaert, 1998.
"Regime Switches in Interest Rates,"
NBER Working Papers
6508, National Bureau of Economic Research, Inc.
- Das, Sanjiv R., 2002. "The surprise element: jumps in interest rates," Journal of Econometrics, Elsevier, vol. 106(1), pages 27-65, January.
- Elerain, Ola & Chib, Siddhartha & Shephard, Neil, 2001.
"Likelihood Inference for Discretely Observed Nonlinear Diffusions,"
Econometric Society, vol. 69(4), pages 959-93, July.
- Ola Elerian & Siddhartha Chib & Neil Shephard, 2000. "Likelihood inference for discretely observed non-linear diffusions," OFRC Working Papers Series 2000mf02, Oxford Financial Research Centre.
- Elerian, O. & Chib, S. & Shephard, N., 1998. "Likelihood INference for Discretely Observed Non-linear Diffusions," Economics Papers 146, Economics Group, Nuffield College, University of Oxford.
- Neil Shephard & Ola Elerian & Siddhartha Chib, 1998. "Likelihood inference for discretely observed non-linear diffusions," Economics Series Working Papers 1998-W10, University of Oxford, Department of Economics.
- David A. Chapman & Neil D. Pearson, 2000.
"Is the Short Rate Drift Actually Nonlinear?,"
Journal of Finance,
American Finance Association, vol. 55(1), pages 355-388, 02.
- Yongmiao Hong & Haitao Li & Feng Zhao, 2004. "Out-of-Sample Performance of Discrete-Time Spot Interest Rate Models," Journal of Business & Economic Statistics, American Statistical Association, vol. 22, pages 457-473, October.
- van Dijk, D.J.C. & Terasvirta, T. & Franses, Ph.H.B.F., 2000.
"Smooth transition autoregressive models - A survey of recent developments,"
Econometric Institute Research Papers
EI 2000-23/A, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.
- Dick van Dijk & Timo Terasvirta & Philip Hans Franses, 2002. "Smooth Transition Autoregressive Models — A Survey Of Recent Developments," Econometric Reviews, Taylor & Francis Journals, vol. 21(1), pages 1-47.
- van Dijk, Dick & Teräsvirta, Timo & Franses, Philip Hans, 2000. "Smooth Transition Autoregressive Models - A Survey of Recent Developments," Working Paper Series in Economics and Finance 380, Stockholm School of Economics, revised 17 Jan 2001.
- Fan, Longzhen & Johansson, Anders C., 2010.
"China's official rates and bond yields,"
Journal of Banking & Finance,
Elsevier, vol. 34(5), pages 996-1007, May.
- Qiang Dai & Kenneth J. Singleton, 2000. "Specification Analysis of Affine Term Structure Models," Journal of Finance, American Finance Association, vol. 55(5), pages 1943-1978, October.
- Ahn, Dong-Hyun & Gao, Bin, 1999. "A Parametric Nonlinear Model of Term Structure Dynamics," Review of Financial Studies, Society for Financial Studies, vol. 12(4), pages 721-62.
- Brenner, Robin J. & Harjes, Richard H. & Kroner, Kenneth F., 1996. "Another Look at Models of the Short-Term Interest Rate," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 31(01), pages 85-107, March.
- Kanas, Angelos, 2008. "On real interest rate dynamics and regime switching," Journal of Banking & Finance, Elsevier, vol. 32(10), pages 2089-2098, October.
- Yacine Aït-Sahalia, 1999. "Transition Densities for Interest Rate and Other Nonlinear Diffusions," Journal of Finance, American Finance Association, vol. 54(4), pages 1361-1395, 08.
- Stanton, Richard, 1997. " A Nonparametric Model of Term Structure Dynamics and the Market Price of Interest Rate Risk," Journal of Finance, American Finance Association, vol. 52(5), pages 1973-2002, December.
- Andersen, Torben G. & Lund, Jesper, 1997. "Estimating continuous-time stochastic volatility models of the short-term interest rate," Journal of Econometrics, Elsevier, vol. 77(2), pages 343-377, April.
- Nowman, Khalid Ben, 2010. "Modelling the UK and Euro yield curves using the Generalized Vasicek model: Empirical results from panel data for one and two factor models," International Review of Financial Analysis, Elsevier, vol. 19(5), pages 334-341, December.
- Loechel, Horst & Packham, Natalie & Walisch, Fabian, 2013. "Determinants of the onshore and offshore Chinese Government yield curves," Frankfurt School - Working Paper Series 202, Frankfurt School of Finance and Management.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).
If references are entirely missing, you can add them using this form.