An Empirical Research On The Correlation Between The Features Of Basic Asset Pool And The Risk Premium Of Asset Backed Securities

Asset securitization in China started in 2005. Just two years or more its test run was broke off by subprime crisis which started in America. We restarted asset securitization in 2012, and in 2013 the authorities declared to promote the development of asset securitization in a regular way in China. Then we saw an explosive growth of asset securitization. We know that the subprime crisis in America was just caused by asset securitization, so we must put a great attention to the risk caused by asset securitization when we decided to give it a great development.This is the reason why this paper born. The asset securitization risk was rooted in the basic assets. So if we controlled the basic assets risks by building a good basic asset pool, we can successfully control the risk of asset securitization. Then we can both enjoy the benefit by asset securitization and ensure the stability of our financial system. Although many scholars from different countries proposed many valuable principles and conditions on the construction of asset pool, there is a weakness in their research that their conclusions are just based on theoretical analysis. All of us accept that practice is the judgement standard of truth. So we need an empirical research on this question.Many asset backed securities are distributed successfully these years, so I think we can use the data produced by these successful asset backed securities for an empirical research. We can make a relatively rigorous quantitative analysis on the correlation between the features of basic asset pool and the risk premium of asset backed securities. If we found the quantitive relationship between them, we can build a much better basic asset pool and make a more precise guidance on asset securitization risk management.This paper build ten theoretic assumptions between the features of basic asset pool and the risk premium of asset backed securities based on theoretical analysis. And then I constructed an econometric model to test the correctness of the theoretic assumptions. I found that the weighted average lending rate of basic asset pool have a significant positive correlation with the risk premium of asset backed securities, the total principal balance of basic asset pool have a negative correlation with the risk premium of asset backed securities, and so did the weighted average loan period、guarantee rate and the weighted average loan age of basic asset pool. Based on these conclusions, I proposed some advises on the construction of basic asset pool and the risk management of asset securitization.