Empirical Research on Term Structure of Shibor Based on TARCH and PGARCH Model

Central Bank has been promoting the market-based process of interest rate in recent years, and will foster Shanghai Interbank Offered Rate (Shibor) into benchmark interest rate. Time series theories, such as GARCH, TARCH and PARCH model, are respectively applied to estimate the term structure of Shibor. The empirical results show: First, as to the fitting results, the PARCH model is better than the GARCH and TGARCH model for fitting the term structure of overnight, one week, two week and one month Shibor, and the TARCH model is better than the GARCH and PARCH model for three month, six month, nine month and one year Shibor. Second, all kinds of Shibor have very strong mean-reversion characteristic. Third, diffusions of term structure of six month, nine month and one year Shibor have lever effect, and diffusions of term structure of overnight, one week, two week and one month have reverse lever effect.