The Quantitative Research Of Trading Price Deviation Of China's Government Bonds In Chinese Interbank Market

This thesis chose China's government bonds in Chinese interbank market as research object. According to Bond pricing theory, the bond's value is decided by its future cash flow and a series of spot rates in future years. But when trading at market, the bond's price don't equal their value, there is some deviation. The main reason of the deviation is that the market participants have different estimate of future spot rates. There is a set of spot rates in market, with this set of sopt rates, the weighted average of the deviation of all China's bonds will be the minimum. By analyzing the trading of the China's government bonds in Chinese interbank market in a period of time, we can bulid a planning solution model, and find out the set of spot rates which we called the most acceptable spot rates vector. This thesis gave a detailed description of the procedure, and made empirical research with the trading data of the China's government bonds in Chinese interbank market in 3rd quarter, 2010. As a result we found out the most acceptable spot rates vector in some time point, and analyzed their features. Furthermore, based on the above research results, this thesis found a way to design an effective trading strategy which can bring more benefit with less risk. This thesis also studied the application of this model in practical work of commercial banks.