The Default Risk Of Regional Governments’ Ddebts And The Research On The Pricing Of Municipal Bonds

Government bonds can be divided as state bonds and local bonds. State bonds that is national debt, is the connection of national monetary policy and fiscal policy. For studying the treasury bonds, the focuses of Chinese scholars are economic effects of the debt, the optimal size of issuing and the term structure of interest rates. But because of China’s special situation, the municipal bonds issuing in China is in the preliminary stage of development, the researches of domestic scholars for municipal bonds are less than that in the research for national debts. The researches for municipal bonds are divided as qualitative and quantitative the two aspects, and the former is in the majority, the latter mainly focuses on the risk of default and the early warning mechanism.I study the problem of municipal bonds from the point’s view of the qualitative and quantitative respectively in this paper. The former mainly refer to the present condition of the debt of local government the municipal bonds issue in detail, the latter involves the probability of default in the different degree of debt scale, and attempts to price the bonds.I am in side of the local government issuing municipal bonds, and the paper focuses on considering the present situation of the local government debt risk, in addition, also discusses the default risk of local government issuing municipal bonds. Financial revenue’s mean and standard deviation of31provinces and cities in China are described in this article, due to the limited time and energy and according to China’s ministry of finance under the state council and the policy, this article uses the mature model to simulate the default size and default probability of the four provinces which are allowed to issue municipal bonds; besides guangdong province disclose the debt balance, therefore, in pricing rationalization, the quantitative risk is discussed, and that, there is certain default risk for guangdong province, of which the unexpected default probability is bigger, the interest rate of bond can’t reflect its own risk, in the market economy system, interest rate pricing should be adjusted according to risk adjustment of bonds.Firstly, this paper introduced the background of this paper, research methods, the present situation of the research of the municipal bonds of at home and abroad, the local government debt and the bonds issue; and then the default risk of local debt and the empirical study with Chinese data, the attempt of the pricing; finally, the corresponding policies and suggestions are given.For the policy recommendations, the author believe that international experience is worth using for reference, among them, as a market economy system of the United States and the similar financial system of Japan as China, the experience of the two countries are worth China to study; last, the author gives the brief policy suggestions of local government issuing municipal bonds.