The fuzzy term structure of interest rates of the National Debt Market in China

Some financial variables can always be observed with perturbations and be expected in the imprecise sense as a result of the fluctuation of financial markets from time to time. Therefore, this paper estimated the fuzzy term structure of interest rates of the National Debt Market in China based on fuzzy regression and fuzzy programming techniques. This method will enable to quantify the anticipated rates in the national debt markets for the future with fuzzy numbers. In order to construct the membership function of this fuzzy term structure of interest rates, it was approximated by using a triangular fuzzy number. Then a fuzzy programming procedure was applied to determine its lower bound and upper bound. Finally, the proposed fuzzy estimation model is tested with the national debt market data in China. The empirical results indicated that the proposed method was a useful tool for modeling the imprecise problems in the fixed income markets.