The Applicability Of The Credit Risk Model In Our Country's Credit Bond Market Research

Increasing the propotion of direct financing is one of the most critical issues in Chinese financial market, and developing credit bond market is among the most importance. Although established late, the bond market is no doubt in its fast track; however, the academic research of credit risk measurement, which is one of the key factors of credit bonds, is far from enough under Chinese context.As the quantative instrument in measuring default risk, credit risk models are playing important roles in the issuance, pricing and default identification of credit bonds, and have been studied and used extensively in western countries. Using the data of short term financing bonds, mid term notes and corporate bonds, the paper will focus on the analysis of the effectiveness of the credit risk models, i.e., KMV, Z-Score, Z"-Score and ZETA, etc., in Chinese credit bond market,Through the research methodology of ANOVA, multilinear regression and case study, the paper finds that KMV and ZETA are effective in grading and pricing Chinese credit bonds, and Z-Score, Z"-Score and ZETA are more useful in default identification. In addition, by comparing the siganificance of credit risk models, credit gradings, issuance scale and underwriters’reputation in the regession of interest spread, the paper argues that the issuance scale of credit bonds in Chinese market is affected by the credit status of the issuer; credit gradings contain more information than the credit models; and the underwriter reputation effect in Chinese credit bond market may derive from investment banks’client positioning strategy. These findings can be the reference in bonds’inssuers and investors’usage of credit risk models and decision makings, and are also meaningful for the further research of the customized credit risk models for Chinese market.