Empirical Study On The Issuance Premium Of Commercial Paper

The commercial paper market in China has been developed dramatically after its first appearance in 2005.The study on its pricing can not only help the investors to recognize the underlying credit risk but also facilitate the development of the fixed income market especially in credit product area in China.Right now, the study on commercial paper still focus on the theoretical stage due to it is an entire new product in the domestic market. While the study on credit product in the matured market usually by structure model or reduced model which is unreliable in the domestic market due to the lack of default data. In this paper, we made analysis and build the pricing model on the foundation of the Z-score model and by selecting KMV model and corporate financial factors based on huge quantity of data.Through analysis, we got five financial factors which can explain the issuance premium differences of each commercial paper and build a pricing model based on financial factors and proved the pricing model is useful in the real market practice.