China's Treasury Yield Curve And Its Application

The fast development of china bond market boosts the research of bond. The most important issue of security markets is the return-risk relation and the return-risk relation of bonds is reflected by the yield curve that describes the relation between yield to maturity (return) and years to maturity (risk),so yield curve is an important analytical tool which serves as the basis of analysis of the trend of interest rate and bond pricing. As the foundation of bonds investment,yield curve can be used to calculate the bid rate in the first market,select bonds and predict the open quotation price in the secondary market. Meanwhile it can serve as reference for government to issue bonds,supervise bonds,implement monetary policy and adjust interest rate.the important issue of the research of yield curve is to discover the quantitative relation between yield to maturity and years to maturity by the analysis of the past trading data so as to calculate the theoretical yield to maturity and predict the forward interest rate of any years to maturity in the future.There are a lot of work been done to the yield curve up to date,but the research can't keep up with the development of bond market. Under such circumstances,this dissertation wants to do some researches focusing on the yield curve. First,the study observes the figures of yield curves of china bond during different periods and qualitatively analyzes how they have developed to such figures. Secondly,the study develops different mathematical models according to different periods by synthesizing previous research and observing the track of scatter plots of yield curves. Thirdly,it quantitatively predicts the trend of interest rate and forward interest rate by these models. Last but not the least,this study come to some conclusions and present some suggestions according to the empirical research.