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Pricing of RMB interest rate swap swap curve based on

Author: ChenZuo
Tutor: YuanZhiGang
School: Fudan University
Course: Finance
Keywords: Interest rate swap (IRS) Swap Curve Pricing ApplicationChinese Library Classification F83
CLC: F832.0
Type: Master's thesis
Year: 2012
Downloads: 211
Quote: 0
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Abstract


This paper focuses on interest rate swaps, which originated in the early1980s and have gained rapid growth in the context of increasing interest rate volatility. Even in the period of global financial crisis, when many kinds of derivatives dramatically shrink, interest rate swap market has however expanded as the most important OTC financial derivative. Compared to the matured international market, the domestic interest rate swap market is still in its initial exploratory stage and there remain problems which are bound to experience in the way ahead to be addressed, such as the uniform pricing basis and the further application.Based on the researches home and abroad, the paper systematically explains detailed pricing method of CNY interest rate swap. Combined with the domestic market reality, more in-depth discussion and research are made on the critical topic of base curve.Main content is as follows:1. Through description of interest rate swap market development and trend as well as theoretical studies home and abroad, the paper points out interest rate swap has become the most important financial derivative and provides market participants with comprehensive understanding of interest rate market upon systematic analysis of the structure, mechanism and pricing method.2. Combined with market reality in China, the paper studies the domestic swap curve and focuses on zero coupon pricing method based on that, so as to construct the CNY interest swap pricing model. The paper then use7day repo and3month Shibor as floating benchmark as an example to show the pricing process and compares the results with government bond curve and financial bond curve.3. The paper collects recent market data and summarizes the domestic interest swap market development, and in turn, points out problems exist and make policy proposals to promote market development.Main conclusion is as follows:1. The CNY swap curve has formed, which is helpful to improve domestic yield curve and make reference to interest rate derivative pricing such as FRA, in order to push forward the interest rate reform.2. It is obtained from numerical results that swap curve combined interbank deposit rate and interest rate swap quote can be effective in zero coupon pricing of CNY interest rate swap.3. It is obtained from pricing comparison, swap curve is more suitable as the bench curve for IRS pricing than government bond curve, and in other words, swap curve is closest to the actual market.4. Through interest rate swap market develops rapidly, but it needs further improvement in the aspects of participant structure and their application. Methods such as the deepening of interest rate reform, construction of floating benchmark, improvement of interest rate term structure, fastening market cultivation and enhancement of laws and regulations are suggested.

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CLC: > Economic > Fiscal, monetary > Finance, banking > China's financial,banking > Principle of policy and its elaborate
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