Title :
Two-Factor Affine Term Structure Model of Interest Rates for Chinese Government Bond Pricing
Author :
Wang, Xiaoguang ; Zhou, Rongxi
Author_Institution :
Sch. of Econ. & Manage., Beijing Univ. of Chem. Technol., Beijing, China
Abstract :
Term structure of interest rates has played an important role in pricing of fixed-income securities. In this paper, the prices of Chinese Government Bond (CGB) are analyzed firstly based on the famous two-factor affine term structure model, namely Longstaff-Schwartz model. First, by using the Kalman filter method, we estimate the parameters of the model, and obtain the price of CGB by Monte Carlo stimulation. Finally, the pricing results of CGB are compared with Vasicek model and Cox, Ingersoll and Ross model. The results show the two-factor affine model has the high precision.
Keywords :
Kalman filters; Monte Carlo methods; economic indicators; government; pricing; Chinese government bond pricing; Kalman filter method; Longstaff-Schwartz model; Monte Carlo stimulation; Vasicek model; fixed income securities; interest rates; two factor affine term structure model; Analytical models; Biological system modeling; Economic indicators; Finance; Predictive models; Pricing; Stochastic processes; Affin term structure models; Chinese Government bond pricing; Kalman filter; Monte Carlo simulation;
Conference_Titel :
Business Intelligence and Financial Engineering (BIFE), 2010 Third International Conference on
Conference_Location :
Hong Kong
Print_ISBN :
978-1-4244-7575-9
DOI :
10.1109/BIFE.2010.52
