Research On The Listed Banks' Perpetual Bond Pricing

After the financial crisis,the international banking industry gradually realized the fragility of the banking industry,and began to attach importance to and strengthen the supervision of bank capital.In order to keep up with the development trend of the international banking industry,China has successively introduced documents such as the Measures for the Capital Management of Commercial Banks(Trial),the New Rules for Asset Management,and the New Rules for Liquidity,which stipulated the minimum requirements for capital adequacy ratios at all levels of commercial banks.Under the background of stricter capital requirements and strengthened bank supervision,the innovation of capital replenishment tools and the correction of capital structural defects are imminent.It is necessary and reasonable to choose perpetual bonds as the focus of bank capital supplementation in the next stage.The issue of pricing is of great importance to the development of bonds.Therefore,this research selected the pricing of perpetual bonds as a research perspective,and studied the theoretical and actual pricing from the perspective of risk pricing to provide a certain reference for the development of perpetual bonds.Firstly,this research investigated and analyzed the influencing factors of the pricing of bank perpetual bonds,established the basic pricing logic of the theoretical rate of return equal to the risk-free interest rate superimposed risk premium and variety premium,then method models were compared and selected based on the analysis results.Thereafter,empirical research was carried out with the components of the yield of perpetual bonds issued by nine listed banks such as Bank of China,China Construction Bank and ICBC.The research period was from the date of bond listing to December 31,2019,involving a total of 1,009 samples' data.In the empirical research,the CIR model was selected to simulate the yields of China Bond Treasury bonds and China Bond Commercial Bank bonds.After calculation,the benchmark interest rate,liquidity risk premium,and credit risk premium were obtained.At the same time,the valuation-based method was used for simulating the value of the redemption right which can be used to obtain the premium of the variety.Finally,the theoretical rate of return can be obtained by summing up,and the accuracy of theoretical results can be verified by Mean Absolute Deviation(MAE),Root Mean Squared Error(RMSE)and goodness of fitting.The empirical and test results show that:(1)According to the pricing logic of this research,bank perpetual bonds can be priced more accurately,and the pricing process should focus on credit,liquidity and variety risks;(2)It is reasonable and feasible to estimate the value of equity using a valuationbased approach and to predict the rate of return with CIR model(3)Being wary of perpetual bonds issued by small and medium-sized banks,which have significantly higher risks than state-owned banks.In the end,based on theoretical and empirical research,this research puts forward several suggestions on the benchmark interest rate,risk factors,clause optimization,and market-oriented development:(1)Improving the benchmark interest rate curve to make the benchmark interest rate more of certain referential significance;(2)Reducing issue costs by controlling liquidity risks and credit risks;(3)Optimizing the content of innovation clauses from the lessons of foreign development experience;(4)Promoting the market-oriented development of pricing by combining various parties.