Research On The Factors Affecting Credit Spreads Of China's Bonds Based On SV Model

Bond is a significant type of financial instrument, its price is affected by interests and credit level of the entity. At present, the study of bonds is mainly from the point of credit spreads. The research on credit spreads has major theoretical and practical significance on the pricing and risk management of China's bonds and their derivatives. At home and abroad, research on credit spreads mainly includes bond valuation, term structure of credit spreads and factors affecting credit spreads. The main contents and innovations of the paper are as follows.(1)In view of credit spreads can reflect the price of corporate bonds and the condition of macroeconomic, the paper selects some trading information of corporate bonds and treasury bonds on a monthly basis, after solving Svensson(1995) model of term structure of interest rates through genetic algorithm, the more exact yield curves of both types of bonds can be obtained, based on which the credit spreads between them generate.(2)According to some statistic data of macroeconomic factors, it can be verified that credit spreads behaves counter-cyclically, and it is lower during business cycle expansions than during contraction through Wilcoxon rank-sum tests. (3)When fitting the yield curves of government bonds based on the data of many different trading days in Shanghai Security Exchange market and Inter-bank bond market through Svensson(1995) model, it is empirically found that the spreads between the yields of government bonds at the same maturity in the two markets not only exit, but also change with the term increases. And the possible reasons for the spreads may be due to market segmentation, different liquidity and trading mechanism.(4)After regression analysis of China's bonds of different terms of maturity but with the same credit rating AAA, it can be concluded that the curve of credit spreads show a downward trend, the reasons for which owe to over-high credit rating of our country's bonds and a non-perfect security mechanism. What's more, the factors which have different effects on the variation of credit spreads in different maturity are almost the same, such as CPI and GDP, and there is a significant correlation among credit spreads series.The research results of this paper develop a new way to estimate the credit spreads, and they have important reference value in predicting future economic trends, investors making reasonable investment decisions, and having good performance of entities'financial management in accordance with changes in credit spreads.