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Chaos recognition and fractal analysis in the term structure of Shanghai Interbank Offered Rate

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  • Gu, Rongbao
  • Chen, Xi
  • Li, Xinjie

Abstract

In this paper, we investigate the Shanghai Interbank Offered Rate (SHIBOR) employing the chaos recognition and fractal analysis. We find that all interest rates of SHIBOR are chaotic systems with multifractal nature. The volatilities of the short-term interest rates are larger than the medium- and long-term interest rates and the magnitudes of these fluctuations decrease with the term increases. The smaller fluctuations of all interest rates have long-term memory property. The larger fluctuations of medium- or long-term interest rates have also long-term memory property but not for those of short-term rates. Moreover, there is long-term memory property between the two interest rates of SHIBOR with one medium- or long-term, but not for both short-term interest rates. Especially, there is also long-term memory between SHIBOR and USD LIBOR. These findings are beneficial not only to understand well the SHIBOR’s running but also to price accurately financial products.

Suggested Citation

  • Gu, Rongbao & Chen, Xi & Li, Xinjie, 2014. "Chaos recognition and fractal analysis in the term structure of Shanghai Interbank Offered Rate," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 412(C), pages 101-112.
    • Handle: RePEc:eee:phsmap:v:412:y:2014:i:c:p:101-112
    DOI: 10.1016/j.physa.2014.06.036
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    5. Sun, Xinxin & Lu, Xinsheng & Yue, Gongzheng & Li, Jianfeng, 2017. "Cross-correlations between the US monetary policy, US dollar index and crude oil market," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 467(C), pages 326-344.

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