Researches On Measuring Credit Risk Of Corporate Bonds And Its Impact On Asset Prices

Since the reform and opening up,China's financial market has developed rapidly.The bond market has also developed vigorously,gradually forming a multi-level market system and a diversified and rich product system.Before 2005,China's credit bonds were mainly corporate bonds,mainly guaranteed by large stateowned banks.The default risk was low and the credit characteristics were not obvious.Short-term securities came out in 2005,which opened the stage for the credit bond market and has been developing for more than 10 years.At the end of 2004,China's credit debt balance was only 200 billion yuan.Since then,the credit debt market has continued to develop at a high speed.By the end of 2018,the credit debt balance reached 28.5 trillion yuan,with a very rapid growth rate.However,with the continuous expansion of the breadth and depth of China's bond market,the credit condition of the market has gradually declined.How to correctly measure the credit risk of credit bonds and identify its industry and regional characteristics,as well as explore the influencing factors of credit risk and its direction of action,need to be studied urgently.Credit spreads and stock returns are theoretically excessive compensation for credit risk.Credit spreads and stock returns generally increase with the increase of credit risk.But in the actual market performance,credit risk and asset prices are not simply positively correlated with theoretical expectations.Analyzing the relationship between credit risk and asset price on the basis of measuring bond credit risk is of great significance for deeply studying the mechanism of credit risk and exploring targeted measures to prevent credit risk.This paper starts with the equity fluctuation of the bond subject,deeply studies the credit risk measurement of the bond subject and its influencing factors,and then further discusses the impact of credit risk on asset prices from the perspective of bonds and stocks.In the part of theoretical research,this paper studies the measurement mechanism of dynamic volatility from the perspective of equity volatility of bond subjects.Then the jump behavior of asset price is introduced to modify the traditional credit risk structured model,and the jump credit risk measurement model is constructed.On the basis of Fama-French three-factor model and Nijman,Swinkels,and Verbeek regression method,based on panel data,this paper constructs a regression model of credit risk influencing factors and the relationship between credit risk and asset price.In the empirical research part,firstly,we compare the dynamic equity volatility based on GARCH model with the static volatility based on historical average data.The comparison shows that default distance measured by static volatility is more trendy,which is in line with the financial situation of bond issuers.Secondly,we use the jump credit risk model to measure the credit risk,and compare it with the credit risk based on traditional structural model.We choose the jump credit risk model and measure the credit risk of corporate bonds according to models' risk identification ability.Empirical results show that companies with weak credit qualifications account for a higher proportion in mining,chemical and public utilities industries,companies of pharmaceutical and biological industries have better credit qualifications,and companies of non-ferrous metals industry distribute more evenly.From the regional perspective,companies with weak credit qualifications in Northwest and Central China account for a higher proportion,while those in East,Northeast and South China have higher overall credit qualifications.The quality of bonds is good,and the distribution of bond types in North China and Southwest China is relatively average.Among the factors affecting the default distance of bonds,the positive factors are company size,credit rating,and the negative factors are asset-liability ratio,bond maturity and bond liquidity.In addition to the measurement of credit risk with jump behavior,this paper studies the impact of credit risk on asset prices from two dimensions: bond market and stock market.We find that credit spreads did not differentiate significantly due to industry attributes before substantial defaults occurred in April 2014.After substantive default,investors began to pay attention to the industry attributes of bonds,and thus credit spreads began to differentiate.The credit spreads of mining,iron and steel,metals and other cyclical industries decrease with the growth rate of industrial added value,and have a greater impact.However,there is no significant correlation between the credit spreads of non-cyclical industries such as media,medicine and biology,city investment and the growth rate of industrial added value.In the stock market,the impact of credit risk on stock returns is related to company size.Under the given credit risk level,the credit risk premium of bond issuer will decrease with the increase of the company size,thus making the stock return lower.When the company size of bond issuer reaches a heigh enough level,the stock returns will not increase because of the existence of credit risk,but decrease because of the returns brought by the scale effect.When the credit risk increases to a certain extent,the impact of company size on the stock returns of bond issuer increases further.The main innovations of this paper are as follows: Firstly,based on the dynamic volatility and static volatility of equity value,this paper measures the credit risk of corporate bond issuers,and chooses the static volatility by comparing the measuring ability,which is rigorous.This paper analyses characteristics of jump risk and credit risk of corporate bonds from perspectives of industry and region,which provides a new perspective of credit risk study.Secondly,in the theoretical research,the volatility of equity value is modeled separately,and the jump behavior is introduced into the measurement of credit risk.Then we studied the impact of credit risk on asset prices to form a more complete vertical logical chain.Thirdly,in the empirical research,the maximum likelihood method is used to estimate the jump risk parameters,describing the jump behavior of the stock price.Then we calculate the default distance by iteration method,and optimize the credit risk measurement model.In the study of the impact of credit risk on asset prices,the paper compares the industry differentiation differences of credit spreads before and after April 2014,and focuses on the relationship between company size and default anomalies of bond issuers,which complements the existing asset pricing researches.