Term structure of China´s short term interest rate

Short term interest rate is the most important price in currency market to capture the dynamics of China´s short term interest rate. This paper puts up a basic model of term structure for China´s interbank offered rate. We proposed several hypotheses for the main parameters of the basis model and applied time series models to empirically study the term structure of China´s interbank offered rate. We found that the term structure of China´s short term interest rate has persistent volatility and the drift error term has apparent asymmetry.