The Pricing Impact Analysis Of Credit Rating To Assets Securitization Product

Since 2014, in order to play the role of asset securitization in developing multi-level capital market, strengthening financial support to the real economy and improving direct financing, the government has developed a series of measures to accelerate asset securitization. Under the policy stimulus of turning examination and approval system to register system and negative inventory management of enterprise asset securitization and larging the scope of underlying assets, the asset securitization market in China come into the fast lane. Althougth facing rapid development, our securitization market faces a series of problem, such as the tax system is not sound, imperfect legal system, unreasonable pricing mechanism, poor secondary market liquidity, lacking of investors and so on. In a word, the root of these problems lies in insufficient market development which is lead by that the pricing mechanism is not perfect. As its own structure complexity, credit ratings play an important role in asset securitization product pricing. However, our country investors are sceptical at the same that they rely on the credit rating of credit rating. Therefore, how to use credit rating information analysis accurate and applicable of pricing model, analysis the effect of credit rating for pricing and validate the pricing efficiency of credit rating, dig the main factor affecting the price is the problem to be solved, which is also the fundamental purpose of the article research.Firstly, we study the research status domestic and overseas. The study period in abroad is long. Meanwhile, foreign scholars launched a wide range of research on asset securitization pricing, such as the pricing risk type, pricing method, the issuer impact on pricing, the impact of credit rating on pricing. Especially after the subprime crisis in 2008 the majority of the research is abount credit rating pricing efficiency, which is mainly falled into two ideas, one is that credit ratings agency is likely to make the unfair credit rating under the benefit induction, the other thinks that credit rating on pricing has important decision effect, but credit rating pricing efficiency is not perfect, namely, the information credit rating agency has considered can still provide additional pricing information. But both views have recognized the importance of credit rating, and the product yield and credit rating have an inverse relationship. Domestic research period about asset securitization pricing is short and the research level is low, which mainly focus on the pricing theory analysis and model exploration, analyzing applicable pricing method for different types of underlying asset securitization. By comparison, you can see that no research using credit rating market data to explain the degree of product pricing research is developed. So it cannot provide guidance for investors to decide whether they should trust rating results, which extent they can depend on and which risks they should pay more attention in the face of different type of products. It is in this paper, the empirical analysis part tries to solve the problem, which is also the innovation of this article.Then, we analyses the development of asset securitization market in China and in America. American asset securitization market started in the great depression in 1930s, experiencing the beginning stage (1938-1968), the formation and development period (1968-1984), innovation and all-round development stage (1985-2007), stable development stage (2008-present). After the subprime crisis there have been some new changes in American asset securitization market, such as MBS products are mainly issued by institutions, ABS products are mainly car loans and credit card loans whose risk is relatively small. But the market scale is not lower much, still accounts for about a third of market scale of American bonds, and it is more cautious for the choose of underlying assets and goes into a more healthy and stable development. Namely, the subprime crisis does not contain the development, it shows it's a financing model which is adapt to the market development and the the importance to guide its healthy development. This is also an important reason for this article to choose asset securitization product as the research object. Compared to the America, the development period of asset securitization market in China is short, which has experienced pilot period (2005-2008), stagnation period (2008-2012), recovery period (2012-present). Asset securitization market in China since 2014 develops rapidly. The issuing scale in 2015 is more than 10 years before, but the market share of the bond market is only 1.2% which means that the potential is huge. However, China's asset securitization products are mainly AAA product at present, which is not enough for dispersion. At the same time, the primary market participants are mainly policy Banks and state-owned commercial Banks and individual investors participation is not enough. Meanwhile, the secondary market turnover rate is low and the liquidity need to be enhanced. The root of these problems is that the current market pricing mechanism is not perfect, so it is an urgent need to explore a reasonable pricing to promote its further development.In the third part, the pricing on the asset securitization market in China are introduced. The static cash flow discount, the static spread way, optional adjust method and regression analysis method have been carried on the detailed introduction. And comparative analysis is made too. Then we analyse the real pricing way in China. The credit asset securitization market in China at present mainly adopts the static spread, while the enterprise asset securitization mainly adopts the static discount method and static spread way, but the overall pricing is sketchy. As a result, it cannot provide guidance for investors to make decisions. So the paper wants to solve the problem through the empirical analysis which also produces the practical needs for our study. Finally, we offer the future development direction about pricing on the basis of establishing the credit database, regulating parters, cultivating good participators and improving the credit rating Angle for asset securitization.The fourth part in this paper is the empirical analysis. Given the diversity of enterprise underlying asset securitization product and the heterogeneity of risk factors, in order to improve the efficiency, we chose the credit assets securitization product which is under the regulatory of China banking regulatory commission from 2005-February 2016 as the research object. At the same time, given the lack of early compensation rate database, we eliminated the non-performing loans and mortgage-backed assets securitization products. To ensure the uniformity of samples we eliminate the sample which is not on that base. This paper analyses the pricing influence of credit rating to assets securitization product with the method of multiple regression, to release the primary market interest rates as the market rate of return, one-year deposit benchmark as risk-free rate, the difference between the two as a risk premium. The underlying asset types, structure and participants will release scale, time limit, subordinated degree, whether commercial loans, whether has the mortgage loan agreement, whether fixed interest rate are as risk factors and credit rating as rating factor. Then we make multivariate regression for the risk premium of risk factor and credit rating factor, at the same time to control the influence of the macro economic situation and market status, we introduce time virtual variables.First through the 2005-2016 on regression analysis we find that credit rating factor does explain product pricing with a strong degree, but the credit rating has been considered that it can still provide additional information for pricing, namely credit rating efficiency is to be improved. Regression analysis results also validate the risk benefit principle and the investor's risk aversion properties; In addition, from the point of whole sample analysis, macro economic and market status, explain product pricing with a big degree, and affect the efficiency of credit rating. Then in view of separate analysis of samples before and after 2014, we find that before 2014 asset securitization product pricing is almost only sensitive to triple-a rating factor and credit rating pricing efficiency is low and the macro economic status and market conditions have more explanatory power on the pricing. However, after 2014 the efficiency rating of a certain credit ratings is improved. In addition, with the analysis of AAA products, we find that the rating efficiency can be improved, but for AAA products investors are less focused on the secondary support, but are more focused on the underlying asset types.Securitization of consumer products relative to the securitization of commercial products, macroeconomic variables restriction to the pricing degree is reduced, the credit rating degree of product pricing is higher, the explanation that the credit rating has been considered no longer provides additional pricing information for product pricing. For the securitization of commercial products, the information that credit rating has been considered can still provide additional pricing information for product pricing.Fixed rate relative to a floating interest rate, credit rating factor degree decreased significantly, at the same time under the fixed interest rate credit rating factor coefficient variation law is not strictly follow the principle of risk aversion, shows that under the fixed rate relatively stable earnings will make investors relax the risk aversion. In addition, whether fixed interest rate or a floating interest rate, investors will no longer be sensitive to whether there is a prepayment agreement variables, shows that credit rating can fully reflect the existence of prepayment risk in that case.Chengxin credit relative to the joint credit, we find chengxin credit rating efficiency overall is higher than joint credit, where the information that the credit rating has considered can still provide additional information to price and joint credit does well in A+products.In this article, through the sample analysis and grouping under different Angle analysis, we find that credit ratings can provide important information on the asset securitization product pricing, but there is also a rating efficiency to the phenomenon, namely the factors that credit rating has been considered can still provide additional information for pricing. The credit rating evaluation efficiency is higher for the securitization of consumer products. For fixed rate securitised products, investors are prone to ignore the credit risk for similar rating.In the paper, through literature review and comparative analysis, uniting qualitative with quantitative and uniting theoretical research with empirical research, we analyse the effects of t credit rating to assets securitization product pricing and find the main affecting factors. And by introducing time virtual variable analysis for macro economic situation and market status, we hope that it can provide useful guidance for investors to make investment decisions and for underwriters to provide reference price, it is also important innovation of this article.