The Safety Scale Measure Of Local Government Bonds Based On The KMV Model

Two thousand municipal bonds are authorized by state council,2009 and 2010. In consider of the large gap among Chinese Provinces, it seems much important for central government to make one reasonable distribution plan to meet the capital need of regional development without default risk. This paper applies the default risk model for municipal bonds by borrowing the methodology of KMV model to thirty-one provinces of China, computes the safe issue volumes of all 30 municipal bonds, then compares the safe issue volumes and the quotas that have been issued by central government to evaluate the default risk level of municipal bonds in different regions. Empirical results is that:The Eastern has the largest amount of the safety debt and the lowest default risk of local bonds; The Central is in the middle; The Western has the smallest amount of safety debt, and there is some risk of default.