The Impact of Central Bank Benchmark Rate on Dynamic Risks of Shibor

On the foundation of valid risk measurement based on AR (2) TARCH (1, 1) EVT, this paper builds co integration and error correction models to analyse how risks of Shibor are dynamically impacted in short and long term by changes of central bank benchmark rate, and to what degree the latter can influence the former. Empirical results show that a long-term positive equilibrium exists between risks of Shibor and benchmark lending rate, in the short term, benchmark lending rate hikes increase risks, and about 17% of the deviation from equilibrium is eliminated in next period, but changes of risks are mainly determined by error correction mechanism.