Which Is Decisive In The Coupon Rate Of Asset-backed Securities:Credit Rating Or Underlying Asset Appraisal

For traditional corporate bonds,the credit rating affects the coupon rate theoretically.The higher the credit rating,the lower the probability of default.the smaller the credit risk,the financing costs should be lower.This logic is very obvious and straightforward on the surface.It is also true in asset-backed securities.In corporate bonds rating,rating agency focus whether the enterprise is bankrupt,which is essentially a "assessment".And asset securitization must be isolated from bankrupt by "real sale",whose core is the value of underlying assets,which in essence belongs to the "appraisal.Therefore,in the asset-backed securities' credit rating and pricing,the appraisal of underlying assets is a very critical factor,which may also be an important direction of China's asset appraisal industry.The price of the asset-backed securities,ie its coupon rate,is largely influenced by the underlying asset appraisal.However,in China's asset securitization practice,practitioners and academics take credit rating as the decisive factor in ABS,just like in corporate bonds.This paper analyzes the impact of credit rating on corporate interest rate in corporate bonds first.And then use asset-backed securities as the research object to explore the role of credit rating and undelying asset appraisal in the coupon rate of ABS.The empirical results show that in traditional corporate bonds,the importance of credit rating may be overestimated.When it comes to asset-backed securities,in practice,the empirical results did not find the evidence that underlying asset appraisal results have significant effect on coupon rate of ABS.