A Study On China’s Floating Rate Notes Issuing Pricing

In recent years, the domestic floating rate notes market develops rapidly. Not only the volume of floating rate notes expands, more sorts of bonds, such as short-term financing bonds and medium-term notes, issue with the floating rate way. Our country lacks the research about the pricing method of floating rate note. Besides, the most common reference rate of floating rate notes in our country is one-year deposit interest rate that is not market-based interest rate, which means the pricing method of floating rate notes in our bond market should be different from the foreign commonly used method. Therefore, how to price the floating rate notes in our bond market is an urge issue.This paper focuses on the pricing method of floating rate notes issuing. We think of the spread of the floating rate notes adjust to the risk-free bond as credit spread. On that basis, the yield of one-year policy financial bond is introduced as an intermediate variable. By analyzing the difference between the floating rate notes adjust to one-year deposit interest rate and yield of one-year policy financial bond, the spread of the floating rate notes adjust to one-year deposit interest rate is decomposed into four factors. Then through regression analysis, the pricing model of floating rate notes issuing is built.The result of the regression indicates four factors all have significant impact on spread and the model fit the spread well. The model is used to simulate tests with8floating rate notes issuing in2012, the result show this model has the instruction function to the pricing of floating rate notes issuing.