Application of Principal Component Analysis in Chinese Sovereign Bond Market and Principal Component-Based Fixed Income Immunization

Lim Tze Yee, Tony She and Kezia Irene

Papers from arXiv.org

Abstract: This paper analyses the Chinese Sovereign bond yield to find out the principal factors affecting the term structure of interest rate changes. We apply Principal Component Analysis (PCA) on our data consisting of the Chinese Sovereign bond from January 2002 till May 2018 with the different yield to maturity. Then we will discuss the multi-factor immunization model (method on hedging market risk) on a bond portfolio.

Date: 2019-11
New Economics Papers: this item is included in nep-tra
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