Research On Commercial Paper Market Operation And Pricing In China

Although the construction of commercial paper market in China has an initialachievement, and its speed of development is rapid. However, compared with theinternational commercial paper market, the commercial paper market in China isfalling behind level as one of the most backward countries in the worldwidecommercial paper market. Compared with other financial markets in the domestic,commercial paper market started later, whose development is far behind in the capitalmarket, bond market and the interbank lending market. As a fundmental monetarymarket, commercial paper market in China has much room for development and playsa very important role on national economy, while it cannot achieve its function causedby exsiting problems. Therefore, research on commercial paper market in China has agreat of significance.Domestic scholars generally have researched on commcial paper market from amacro perspective rather than from micro-pricing and the empirical analysis is veryrare. This dissertation attempts to research on commercial paper market operation andpricing in China. In order to analyze the overall run and drawbacks of Chinacommercial paper market, the dissertation carries out a comparative study ondevelopment and risk in commercial paper market between domestic and internationalfirstly; then divides commercial paper market into acceptance mechanism, circulationmechanism and rediscount mechanism and explains the performance of the threeabove and their relationship;Finally,the dissertation takes an empirical reseach ondiscount rate and rediscount rate pricing in the market.Qualitative analysis is used in the study of development and risk in domesticcommercial paper market; Quantitative analysis including simulation, cointegrationand error correction method is used in the study of commercial paper pricing.Thediscount rate pricing is by modeling the error correction equation concluding influentfactors；the rediscount rate is by establishing the cointegration regression model andrandom numerical simulation of the Vasicek model and CIR model.Compared commercial paper market in China to international mature ones, thereare gaps in the perfection of market elements, the rediscount performation, the level ofinformation technology, financial openness and whether money market fundsparticipating in. The U.S. is on behalf of mature paper commercial papermarket in the risk compative, which usually appears credit risk and liquidity risk, while the risk inChina is more diversified. In addition to China has its own risk characteristics, thereare also performance differences even in the same kind of risks faced by both markets.The operation mechanism study of commercial paper market in China exploresserious problems existing in its trading mechanism, market structure and therediscount, to solve them the dessertion makes some recommendations.The empirical research conclusions are as follows: firstly, there is long-runequilibrium relationship between commercial paper discount rate and rediscount rate,and the enduring elasticity of discount rate on rediscount rate is larger than theshort-term. Secondly, there is lasting stable equilibrium relationship betweenrediscount rate and SHIBOR6M; thirdly, random numerical simulation explores theresults generated by Vasicek model is much better than CIR model.Based on previous research, the dissertation unfolds the market operation andpricing in the commercial paper market in China. By the framework of the research,the qualitative and quantitative analysis can be combined, and thus provides a newidea for the study of commercial paper market in China.The dissertation is organized as follows:Chapter I introduce the background and significance of the dissertation firstly;then introduced its idea, method, framework and main content. At last, it points outthe innovations and shortcomings of the research and further research prospect.Chapter II is literature review of commercial paper market. In view of thedomestic and foreign literature on commercial paper market, the dissertation dividesthem into two derections the commercial paper market operation and commercialpaper pricing, which are summarized and gives literature review in conclusion.Chapter III introduces the theory of commercial paper pricing to guide empiricalanalysis engaged in the dissertation. The theoretical basis includes theory of interestrates decisions, interest rate structure theory and short-term dynamic interest ratemodels. Four important theories of interest rate decision are introduced; theory ofinterest rate structure includes risk structure and term structure; dynamic short-terminterest rate models are introduced by two types as no-arbitrage models and generalequilibrium models.Chapter IV reveals the operation conditions and deficiencies of commercialpaper market in China by comparing the development and risk of commercial papermarket in developed countries and that of China. In the current development comparison with the two, mature commercial paper developed countries chooses theU.S., Japan, Britain, Germany and Europe. In the risk comparison with the two，theU.S. commercial paper market is on behalf of mature market.Chapter V studies on operation mechanism for commercial paper market inChina, including market elements and structure, acceptance mechanism, circulationmechanisms and rediscount mechanism. The market elements study includes itstransaction subject, object, price and trade system; the structure divides the marketinto three levels whose relationship also is discussed; and it analyzes the process ofthree sub-mechanisms and their interaction.Chapter VI is the empirical analysis of commercial paper market in China ascommercial paper discount and rediscount rate pricing. Firstly, it analyzes interest ratesystem, impact factors and general pricing methods of commercial paper market inChina; the discount empirical analysis explores mutual changes among discount rateand several money market interest rates; Empirical Analysis of the rediscount ratepricing model with two ideas: one is based on benchmark rate Shibor; the other is thenumerical simulation of pricing based on short-term dynamic models.Chapter VII is the conclusion and research prospect.