Research on the Function of Interest Rate Swap on the Price Discovery of National Bond Spots in China

Abstract

Abstract: In the context of interest rate marketization and RMB internationalization, from the three perspectives of the causal relationship between interest rate swap and national bond spot, the price discovery contribution and the volatility spillover effects, this paper conducts an in-depth study of the relationship between interest rate swap and national bond spot. The findings show that there is a long-term stable co-integration relationship between interest rate swap and national bond spot. The price discovery function of interest rate swap is stronger than that of national bond spot, and the synergy between the two markets is mainly driven by interest rate swap. Moreover, in the short term, only interest rate swap has a volatile spillover effect on the national bond spot; in the long term, there is a two-way volatility spillover effect between interest rate swap and national bond spot. Stocks and exchange rates only have a significant impact on the long-term correlation coefficients, no significant effect is found on the short-term correlation coefficients. Therefore, we should pay attention to the market impact brought by financial derivative transactions, fully consider the impact of the derivative market on the financial market stability, vigorously develop the interest rate derivative market, establish a dual-pillar system of interest rate swap and bond futures, and focus on the development of interest rate derivatives based on policy tools. We should also better identify and judge the impact of market information, effectively improve the hedging efficiency of interest rate swap, and increase the hedge ratio of long-term interest rate swap on national bond spots in the market environment of rising stock markets and devaluating exchange rates.

Key words: interest rate swap, national bond spot, information share model, BEKK Model, DCC-GARCH Model

CLC Number:

F830.95

ZHANG Chong. Research on the Function of Interest Rate Swap on the Price Discovery of National Bond Spots in China[J]. Contemporary Finance & Economics, 2020, 0(3): 64-77.

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