Abstract: The three-factor affine term structure models with square-root diffusion process are developed in this paper,and the Kalman filter method to estimate the parameters of the model is given.So the prices of treasury bonds are analyzed by Monte Carlo stimulation.The pricing results of Chinese treasury bonds are compared with Longstaff-Schwartz model,Vasicek model and Cox-Ingersoll-Ross model.The results show that multi-factor models are superior to the single factor,and the two-factor affine model has the higher precision than three factor model.It can provide the technology support for effectively pricing the treasury bonds in China.

Key words: multi-factor affine term structure models, Kalman filter, Monte Carlo simulation, pricing treasury bonds