State-owned Commercial Banks' Bad Assets Supporting Securities Design Method

After 8-year experience in dealing with non-performing asset, four capital management enterprises have gathered many complicated and modern pricing methods which improve the disposal efficiency. Non-performing loan rate in our country has also decreased sharply.Asset-Backed Securitization is the innovation tool of American commercial banks in 1960s.It is the process that at first collecting the receivables which is lack of liquidity but owns future cash low and then through restructuring them, converting them to the securities which can be sold and circulated in the market.This paper at first analyzes the status quo of non-performing asset of commercial banks in our country and then analyzes the cause of its formation. It also introduces the ways to deal with non-performing asset in our country and their strongpoint and shortcomings, and then gets conclusion that securitization of non-performing asset is the most efficient way to solve the problem of higher non-performing asset rate of our country's commercial banks. Through references summary, this paper analyzes the feasibility of securitization of non-performing asset for commercial banks in our country and also discusses the pricing of non-performing asset.In the second chapter, according to a case of design of non-performing asset backed security in our country, this paper analyzes the main problems existing in our country which are appraisal of non-performing asset and design of the asset pool. Then, in the third chapter it introduces real option theory and divides the appraisal of non-performing asset into two parts which are fundamental asset and option value. The value of non-performing asset is the sum of fundamental asset and option value. New appraisal method has active effect to appraise non-performing asset correctly and can prevent the drain of stated owned asset. Assets pools structured by non-performing asset are unstable in the future cash flow, so in the fourth chapter of this paper it restructures it with BET method and portfolio theory, and then it puts forward that adding some high quality asset to the assets pool can stabilize the cash flow. In the process of designing the asset pool, it introduces portfolio theory and then it believes that according to the different profits level, asset Management Corporation can structure different assets pools.It uses the CAPM model put forward in the fifth chapter to determine the risk revenue discount rate of the asset-backed security issued. At last this paper gives a case of securitization of non-performing asset in commercial bank with the combination of the reality of commercial banks in our country.