| The financial derivatives trading is the kind of trading which began popular from 1970s～1980s during last century,it has played a big role in helping investors to avoid market risks and credit risks.Among all kinds of derivatives instruments,The increase of the interest rate swap(IRS) became the most remarkable,according to statistics released by Bank of International Settlement(BIS),in recent years,IRS always takes the proportion of above 50%in all kinds of derivatives trading.But in our country, IRS is still a new-born subject.Its trading volume lags far behind some fundamental instruments,and its status in domestic financial market cannot be compared with the one in overseas market at all.So,domestic IRS has a large space for further development.It's very useful for boosting domestic IRS trading if we can take out a deep research on the trading mechanism,functions,pricing tools and risk management of theoretical IRS.This article is composed of six major charts.The first chart tells the definition, cash flow structure and the functions of IRS.In definition,IRS is the future payment agreement concluded by two parties,in which the amount paid is calculated by certain kinds of interest rate and certain amount of principal.In a typical IRS,one party pays the floating rate,while the other one pays the fixed rate.The main functions of IRS lie in such fields as comparatively cheap financing cost,interest rate management,adding profit model and price discovery,etc.In chapter 2,the article makes some introduction for the economic principles, pricing theories and spread demonstrations of IRS in historical order,by combing and reviewing many IRS pricing theories both in overseas and domestic market,the article tells the growing track of IRS pricing ideas,such as non-risk pricing theory,unilateral default pricing theory,bilateral default pricing theory and domestic academic contribution for IRS pricing.In chapter 3,the article summarized the running conditions of domestic IRS by showing substantive data from various aspects,including(1) review of real condition of each benchmark pegged IRS and the explanation for cause of relative background and developing status.(2) summary of the spread between IRS price and yield of Financial bond.(3) description of changing character of domestic IRS term structure.(4) discussion of rationality of each benchmark's formation.In chapter 4,Since presently our IRS still walks at its starting stage,the article selected and deducted relative pricing models from IRS pricing theories,which is adapted to our current IRS environment,and tried to probe the reason for domestic IRS pricing in combination with the actual trading price.The efforts include,on one hand,discussing the conformity degree of our IRS to bilateral credit risks adjustment theory,and the result showed that bilateral credit risks adjustment theory can answer for the nature of IRS price to some extent.On the other hand,through the deduction of FRA-like formula,the article open out one more kind of purpose for IRS in estimating long term financing interest rate.Based on the conclusion,it pointed out that the IRS curve is one important component in domestic interest rate system.In chapter 5,to improve the composing factors of IRS pricing,the article brought forward both suggestions for relative development of market infrastructure,which includes further strengthening domestic credit system construction,activating long-term financing,improving formation mechanism of Shibor quoted price, tightening IRS credit risk control mechanism by those participants,and reification of accounting rules for IRS valuation,etc.In chapter 6,the article summarized all jobs done in the previous parts,mentioned both the creativities and deficiencies in the article,and made the prospect for future studying direction and the dependence of IRS pricing.It pointed out that IRS pricing is likely to shift from pure judgement for long term financing rate to the reflection of bilateral credit risk adjustment. |
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