Researchment Of China Energy Corporate Bond Pricing

The rate differential between the yields of corporate bonds and risk-free bondwhich have the same term structure is called the credit spreads. We use the nationaldebt with the highest credit rating as risk-free bonds. Credit spreads is used tocompensate for the additional income of corporate bonds’ credit risk.As China’s corporate bond market appears not long, the study of credit spreads inChina is still in its infancy. Most domestic researchers sum up foreign research, whilefew of them do innovative empirical study. Building credit spread term structuremodel is the foundation stone of credit bonds and related derivatives pricing. With thedevelopment and maturity of the corporate bond market in China, the practicalsignificance of studying credit spread will further highlights.In the theory part, this article elaborated the two most basic credit spread models.Structural model regarded debt as a put option of the company’s assets, to derive thatthe credit spreads is only relevant to the credit risk of the enterprise. While the creditspreads deduced from reduced model contained the expected default losscompensation and the risk premium was mainly based on market data analysis, whichwas more suitable for our country’s corporate debt market at this stage.In the empirical part, we considered the characteristics of China’s bond market.Then we used NSS model to estimate the term structure of risk-free interest rate andthe term structure curves of the energy industries, petrochemical, power and coal.After that, we built the multivariate regression model of credit spreads of corporatebonds in the previous industries. Subsequently, based on the term structure of creditspreads, risk-free term structure and pulse testing and correction on the model, we usethe modified model to predict credit spreads. Ultimately comparing the predictedvalue and the actual value, we determined the mode of corporate bond issuancepricing according to the reduced pricing model and bookkeeping bond distributionterms.Combined with the development of domestic bond markets and the empirical testresults, we pointed out that China’s bond market was far from perfect, corporate bondissuance’s marketization was not fully shaped, the new debt always led to high pricesexist, which resulted in the deviation between bond prices and its value.