Research On The Behavior Of Short-term Bond Repo Rate Of China

In this paper,we researched on the7day’s bond repo rate of China.Withthe GMM estimator,we evaluated the parameters of CKLS model and the otherrestricted models,the results of estimate shows that the CKLS model is thebest one factor model to simulate the repo rate both of the stock exchangemarket and the inter-bank,this conclusion can be proved by the significanceperformance of those parameters of different models,the veracity of simulatethe variance of interest rate and the test between the unrestricted and therestricted model.We also find that there is large difference between the long term averagerate of bond repo of the exchange house and the inter-bank market.It meansthat the stock exchange market and the inter-bank market is in a state ofsegmentation,the single bond repo market hasn’t become true in Chinayet.This will block the development of the money market of China,and bringtroubles to the asset pricing.The variance rate of inter-bank repo rate is large than that of the stockexchange market.This may be aroused by the different trading system andparticipants between the stock exchange market and the inter-bank market.Instock exchange market, the trading system of bond repo agreement is thesame as the stock exchange,but in the inter-bank market,the trading system isthe same as the OTC market.In stock exchange market,every body who havea stock account and enough money can participate in the bond repoexchange,but in the inter-bank market,only limited financial institutions can bethe participants.In this paper,the elasticity of variance is0.9352in the stock exchangemarket and1.3434in the inter-bank market,it’s different from the estimate ofothers.Additionally,we proved that there are obvious mean-revertion phenomenain both stock exchange market and inter-bank market.