| Autor: |
Yu Guan, Zhongzheng Fang, Xingshuai Wang, Xi Wang, Ting Yu |
| Jazyk: |
angličtina |
| Rok vydání: |
2024 |
| Předmět: |
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| Zdroj: |
Heliyon, Vol 10, Iss 9, Pp e30206- (2024) |
| Druh dokumentu: |
article |
| ISSN: |
2405-8440 |
| DOI: |
10.1016/j.heliyon.2024.e30206 |
| Popis: |
This study's principal mathematical deduction exploits the importance of the specification of long-term equilibrium level in the mean-reversion short-term interest rate model—such as the CKLS (Chan, Karolyi, Longstaff, and Sanders) model—to describe the dynamic characteristics of future short-term interest rate expectations, especially long-horizon expectations. Therefore, we present a preferred model by introducing a stochastic long-run equilibrium level factor to extend the specifications of the Vasicek model's short-term interest rate dynamics. Using this new type of short-term interest rate as a driver we develop a two-factor affine arbitrage-free model of term structure, the generalized Vasicek mode. The empirical results show that the model not only has a good sample fitting ability to the Chinese government bond yield curve, but also has better performance in capturing the dynamic characteristics of short-term interest rates and short-term interest rate expectations. This study provides not only a promising avenue for future research on improving interest rate modeling techniques and their practical applications in the financial industry but also a new literature base for accurately identifying public expectations and explaining the underlying mechanisms of expectation changes. |
| Databáze: |
Directory of Open Access Journals |
| Externí odkaz: |
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