On Corporate Bond Pricing And Measurement Of Interest Rate Risk

In July20,2013, the full liberalisation of financial institution’s lower limit controls of loan interest rate marked the reform of interest rate marketization of China’s market to enter a new stage. Along with the accelerated process of interest rate marketization,it becomes more and more important to research the interest rate risk and value of bond.It has an important significance for bond issuers and investors.It helps investors to make the right investment decision.In this paper, it used the duration to measure the interest rate risk of corporate bond, it established a duration model of corporate bond which considered the effect of the default risk on the cash flow and the effect of tax, the term of structure of interest rate is not flat. it also used the discounted cash flow model to research the value of corporate bond which was based on the interest rate risk and so on. It selected the treasury bonds, corporate bonds and the perochemical industry bond of shanghai Stock Exchange to make the empirical research which was based on estimation and liner regression method. The result showed that it will be overestimated its interest rate risk if it neglected the default risk of the corporate bonds. So it necessaryed to consider the impact of default risk on the cash flow. It can be a true method to measure the bonds interest rate risk;The result showed that the theoretical price of bond A which considered the effect of these factors was lowerd than the market price,the price of the bond is overvalued. all of these have a good reference for investors to choose the right investment strategy.