Product Design Of Credit Default Swap Based On Bond Market Of China

The bond market of China has grown rapidly over the past three decades.However,with the maturity of the bond market,bond defaults have become a regular phenomenon.Facing the credit risk of high accumulation,the government abandons the former administrative intervention method but adopts the marketization method to release the credit risk.In September of 2016,National Association of Financial Market Institutional Investors officially issued "Pilot business rules for credit risk mitigation tools for interbank market".It marks the introduction of credit default swaps(CDS)into the Chinese bond market.The function of credit default swap is to hedge and transfer credit risk in the market.As long as investors buy credit protection,they can demand that the seller make up for the losses caused by the bond default.In this paper,the historical development process and mainstream pricing model of credit default swaps are analyzed,choosing a simple model that is more closely related to historical price changes and transaction information of bonds.At the same time,to compensate for the deficiency of the company's financial situation,we combined the PFM model to price credit default swap products.Comparing the investment returns before and after the credit default swap contract,the validity of the credit risk is confirmed,through the introduction of "15 ZhongChengJian MTN001" default case.Finally,the paper analyzes the problems of credit default swap in China's bond market.By changing the concept of rating,perfecting the rating mechanism and the supervision system,the credit default swap can better serve China's bond market,effectively dissolving and releasing the increasing credit risk.