The Research On The Yields Of Government Bonds With Stochastic Volatility Model

As one of the main way of financing,in recent years,the Chinese government is very concerned about the development of the Treasury bond market.For financial markets,the volatility of yield is the most concern of the scholar.In the Treasury bond market,the reason that lead to volatility of yields is concerned by scholars.The problem of volatility of financial asset has always been a very hot topic in finance,the more popular of the two models are:Autoregressive conditional heteroskedasticity model(ARCH model)and stochastic volatility model.After of that,there are several kinds of models developed to character the stochastic volatility of yields which have different features,including GARCH model,CIR model and etc.So far,these models played a major role in the study of the stock,futures and options.In this article,the author uses stochastic volatility model as the main model,cooperate with GARCH model to study the volatility of yield of Treasury bond market,to explore the behavior of the two models in the volatility of yields of bond.At the same time,we also use some statistical methods to research the relationship between the yield of bond and the benchmark interest rate.We first use part of the data to model,then use the model to predict the backward,after of which we will compare the differences between the predicted values and the actual value in terms of residual error,relationship with the benchmark,etc.After the related empirical analysis we found that the behavior of the stochastic volatility on the volatility of bond yields is better than GARCH model,especially in the short term debt assets stochastic volatility model showed obvious superiority.At the same time,there is no significant correlation between the Bond yields and the benchmark.