Small And Medium - Sized Enterprise Portfolio Bonds And Their Risk Measurement And Risk Control

SMEs (small and medium enterprises) financing difficulties have always been problems which troubled countries worldwide, and China is no exception. Lack of modern management concepts, the small scale and the low level of credit, lack of guarantees secured by the property are causing factors for SME financing difficulties. With gumption and innovation China explores actively and tries to find solutions for SME financing difficulties."Three collective Securities"(SME collective bonds, SME collective notes, SME collective Trust) are products in the process of our innovation. SME collective bond is a form of corporate bond, which is issued by a union consisted by a number of small and medium enterprises. Each company accounts for a certain percentage of the total degree in bond issuance in accordance with firm size and financing needs. Each company is only responsible for its own amount of debt, the repayment of the principal and interest obligations. The bond components are unified named externally and share unified reimbursement, and handed over to third-party for unified guarantee and unified rating. SME collective bonds try to overcome the problem that a single enterprise cannot issue bond independently due to the small scale. Collective bonds also bring down the financing threshold. Risk concentration and financing costs for single enterprise to issue bonds independently are reduced through the collection of debt issuance. Therefore, by the innovation of "issuing bundled bonds", the SME collective bonds break the monopoly of large and medium-sized enterprises in the traditional sense of the bond issuance market, has opened up new channels for direct bond financing for SMEsHowever, the SME collective bonds encountered a new problem in China’s development process. In2012, the debt share of Di jie Communication Ltd was ultimately paid by its’ secured party. This phenomenon of payments difficulties appeared for the first time on the market of SME collective bonds excited the broad questions as to the safety for SME collective bonds. This paper attempts to analysis SME collective bonds from the angles of the generation mechanism and control mechanism of credit risk, to explore the internal mechanism, the external manifestation, the quantitative methods, and the control mechanism of credit risk for SMEs.The first section of this paper gives a summary review of domestic and foreign literatures about SMEs bonds and related credit risk measurement and control mechanisms, acknowledging academic research status nowadays. The second section describes the current development of China’s SME collective bonds market. The third section focuses on the creation mechanism of Chinese SMEs bond credit risk and introduces the basic theories of credit risk measurement. Section four tells us how to take use of foreign ripe KMV model to measure the credit risk of SME collective bonds. In section five, Empirical demonstration is composed of the application of KMV model in an example of quantitative analysis of the credit risk of SMEs collective bond in China. Finally, Section six expounds on the characteristics of credit risk for our SME collective bonds, trying to give a channel which is targeted for our environment to control credit risk.