The Deducing of Instantaneous Interest Rates about Treasury Bonds

Term Structure of treasury bonds interest rates provides a characterization of interest rates as a function of maturity.It describes the dynamic changes of interest rates,and has an important application in economics and finance.Term Structure can not only be used to price fixed-income securities such as the most of treasury bonds,but also to valuate the futures contracts and contingent claims(Brennan and Schwarts,1977).For it's widely application,many scholars have paid attention to its deduction,but the term structure appropriate to our capital market has not be found.This paper firstly quotes the extended Nelson-Siegel model to deduce Chinese term structure,this model is widely used to deduce the term structure of treasury bonds in the countries with developed capital market.And then the deduced term structure is used to price 20 kinds of different Chinese treasury bonds which listed in Shanghai Stock Exchange(SSE).Through comparing with the observed data,the model has a good fitness.