Our City To Vote Bonds Credit Risk Analysis

After the tax system reform in 1994, and local government's fiscal revenue substantially reduced, the speed of economic construction is accelerating. In this context, the local fiscal gap is increasing continuously. In recent years, the Government encourages direct financing instruments, requires "a positive development of capital markets, stocks and bonds. Strengthen the institutional infrastructure. A multi-level marketing system. Improve the functioning of markets. Increase the proportion of direct financing.". In order to resist the financial crisis in 2008, the Government plans to make four trillion investments. Local government finances from inter-bank market in the context of four trillion investment and development of Inter-bank market. With the gradual expansion of the scale issue, the credit risk of City construction investment bond highlighted.In this paper, using Normative analysis, I explore the main source of City construction investment bond, such as agency by agreement, the local government revenue fluctuations, the difference of City construction investment bond's term and the term of project. In the base of them, I made a quantitative analysis of City construction investment bond's risk; The paper summarized and analyzed the four main credit risk measurement models. The paper analyzed the basic assumptions,the basic ideas and the corresponding disadvantages. On the base of analysis of City construction investment bond's characteristics.the paper thinks KMV model is the most suitable one for the analysis of the credit risk of City construction investment bond; The paper makes an empirical analysis of City construction investment bond's credit risk of Chongqing. Through normative analysis and quantitative analysis, the paper considers credit risk of City construction investment bond's to be the most important risk during the process of investment for investors. The KMV model is the most suitable model for the analysis of City construction investment bond. Through the quantitative analysis, I think that the issue size of City construction investment bond has not lead to significant credit risk. However stress testing shows that the growth of City construction investment bond's issue size can not blind. the Government should control the growth rate of bond issuance.