Page 76 - Contributed Paper Session (CPS) - Volume 5

CPS1053 DU zhixiu
where m(θ) is sample moment.

The rate of return on financial assets is related not only to the risk
premium, but also to the term of the asset, namely liquidity. The most widely
used model for simulating interest rate behavior is the square root diffusion
process. The expression of the CIR model is as follows:

Where is the interest rate, μ is the long term mean value of return on
assets, α is the mean regression rate, √ is the volatility of instantaneous
volatility, is standard Brownian motion. Its likelihood function is as
follows:

The Maximum Likelihood Estimation (MLE) equation of parameters is:

The risk of deposit and loan is reflected in the default risk, which is
recordedd.The linear sum of the three kinds of risks analyzed above is the
reference rate considering risk premium, liquidity premium or default risk, and
are denoted as−and −−.

C. Establishment of the account reference rate model
The SNA 2008 suggests the reference rate should consider risk premiums
and not include any service factors. This paper discusses the situation that
depositor and loaner face the same risks. This situation is mainly that FIs does
not have a higher credit guarantee, and the risks are bound to be transferred
to the depositor and lender or other institutions. In this way, the risks of
deposits and loans are the same, and the reference rate of both is the same,
which is higher than the risk-free rate.
In this case, the determination of the reference rate can be based on the
reference rate of the loan. According to the principle of opportunity cost, the
reference rate of the loan can be considered from the perspective of the rate
of return of other assets. Build FIs capital flow and stock table, as shown in
table 4. The code in the table is the code of each indicator of SNA 2008. FIs
owns deposits, bonds and equity capital other than loans. The FIs use only
deposits, bonds and equity capital, not loans. AFA is the column vectors of
other financial assets other than loans, AFLis the column vectors of other

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