Modeling the Dynamics of Shanghai Interbank Offered Rate Based on Single-Factor Short Rate Processes

摘要

Using the Shanghai Interbank Offered Rate data of overnight, 1 week, 2 weekand 1 month, this paper provides a comparative analysis of some popular one-factorshort rate models, including the Merton model, the geometric Brownian model, theVasicek model, the Cox-Ingersoll-Ross model, and the mean-reversion jump-diffusionmodel. The parameter estimation and the model selection of these single-factorshort interest rate models are investigated. We document that the most successfulmodel in capturing the Shanghai Interbank Offered Rate is the mean-reversion jump-diffusion model.