Research On Solutions To The Liquidity Insufficiency Of Credit Ridk Mitigation Market In China

In October 2010,China launched the Credit Risk Mitigation Agreement for the first time,hereinafter referred to as CRMA,Credit Risk Mitigation Warranty,hereinafter referred to as CRMW,and in September 2016 introduced Credit Default Swap,hereinafter referred to as CDS,Credit-linked Notes,hereinafter referred to as CLN.Up to now,CRMW,CRMA and CLN have made preliminary attempts in the inter-bank market in China.The implementation of CRM products meets the increasing demand for credit risk management in the market.Among them,CRMW products occupy the vast majority of the CRM market in China,which is also the focus of this paper.By comparing the credit derivatives market before and after the financial crisis in foreign countries and the indexes of the same type of product market at home and abroad,this paper draws a conclusion that the current CRM market in China has some problems,such as small scale,single participant type,single product type,lack of standardization,imperfect market mechanism and supervision,etc.The current CRM market can not fully satisfy market participation.The needs of the people.Through the analysis of general liquidity indicators and other indicators such as market product supply,it is concluded that there are liquidity problems in China's CRMW secondary market.On the one hand,how to improve the liquidity of China's CRM market,explore the reasons for the lack of liquidity of China's CRM market,and give specific suggestions to increase market activity;on the other hand,how to learn from the experience of foreign financial crisis,establish a sound market supporting operation mechanism and regulatory measures,and control the risks brought by CRM within a reasonable range,which is to improve China's CRM ?.Level market liquidity,to promote its long-term healthy development of the necessary research issuesCRMW is the focus of this paper.This paper will analyze the reasons for the lack of market liquidity from three aspects:the basic level of CRMW product pricing,the level of CRMW market trading mechanism and the level of CRMW market supervision.This paper refers to a large number of data,literature reports,departmental documents and so on.Through qualitative and quantitative methods,the main reasons for the lack of liquidity in China's CRMW market are as follows:First,the lack of pricing basis in China is manifested in the immature market environment of China's credit industry,the lack of credit evaluation of bonds,CRMW products and traders,which leads to the single participants and the lack of credit evaluation.Lack of effective differentiation and imperfect pricing model lead to weak pricing basis of CRMW products,insufficient motive power of buyers and sellers,and insufficient market liquidity.Secondly,imperfect market trading mechanism in China is manifested in the lack of two-way quotation system of core traders,idle central clearing function,and imperfect default decision rules,which lead to insufficient market liquidity.The defects and concerns of market supervision in China are manifested in the defects of rules and regulations,the absence of a cooperative mechanism among various regulatory departments,and the high risk concerns of regulatory authorities,which lead to the lack of market liquidity.Therefore,in view of the problems raised,this paper puts forward the following suggestions on improving the liquidity of CRMW secondary market and controlling risks:first,the basic level of pricing:reforming the credit evaluation industry of our country,enriching the pricing basis and model,building a reasonable external supporting environment for pricing,thereby strengthening the pricing basis of CRMW products in China,and laying the foundation for improving liquidity;second,the level of market trading mechanism:Establish a two-way quotation mechanism for core traders,encourage more qualified institutions to participate in market transactions,improve default liquidation rules,and give full play to the central liquidation function,so as to open the way for improving liquidity.Third,market supervision mechanism:improve the market supervision of CRMW in China,including remedying the defects of current regulatory rules and regulations,establishing relevant supporting laws and regulations such as information disclosure,establishing an early warning index system for transaction settlement risk,and strengthening the cooperation among various regulatory departments,so as to control the risks brought by CRMW within a reasonable range.In the proposals,we not only learned the negative lessons of credit derivatives in the crisis,but also referred to the positive experience of foreign countries.As the main force of CRM market in China,CRMW products have played an important role in the credit risk mitigation market.I hope that through some research in this paper,CRMW products will contribute to the healthy and rational development of CRM market and fully disseminate the vitality of CRM market in China.