Empirical Research on Chinese Term Structure of Interest Rate Using Polynomial Splines

Term structure of interest rates is a basic problem in the financial field. Especially in the process of China´s marketization of interest rates, researching the term structure of interest rates has very important theoretical and practical significance to the development and improvement of China´s financial market. The paper research the term structure of interest rate using the polynomial splines model. Especially the methods for heteroscedasticity of term structure model of interest rates are discussed and given empirical research. The empirical results show that the polynomial splines model can significantly decrease the errors of government bond pricing and is suitable for modeling the term structure of interest rate of China. The yield curve of the method for heteroscedasticity is more likely to that of the developed countries. We can get the conclusion that the method for heteroscedasticity is better than the method for the same variance through the pictures.