The Credit Risk Of Municipal Bonds. Knight, Uncertainty Metrics

With the acceleration of urbanization process in China, local governments have increasingly urgent demands for capital. In other countries, local governments issue municipal bonds are the main financing channels. China should also vigorously develop the municipal bond market and municipal bond issues in the most important issue is the size of its bond issues and credit risk measurement. Therefore, how to measure the size of municipal bond issuance, and a reasonable credit risk, it becomes a need for urgent research. This article is in this context to explore how to use fuzzy method to measure uncertainty municipal bond issuance process in the issue of treasury bonds and credit risk, has strong practical significance.In this paper, municipal bonds and municipal bonds, the related theories of risk measurement beginning of the emergence and development of municipal bonds have done a brief introduction, and through the experience of foreign distribution analysis and reference, the Beijing municipal bond issuance related issues are described. And then summing up the issues related to municipal bond issuance, the rise to its issuance of credit risk measurement process of the problem, pointed out the direction for future research.A measure of credit risk on municipal bonds, either using the existing methods of risk measurement metrics, but also the actual situation can be improved. This article is based on the KMV model, in-depth with the specific characteristics of municipal bonds, through the introduction of vague concepts and methods of uncertainty of the model a series of improvements, obtained fuzzy uncertainty measure of credit risk under the model of municipal bonds.In Beijing municipal bonds issued empirical study, the use of ARIMA method were measured on the revenue forecasts, and then the data derived from the use of fuzzy uncertainty measure of credit risk under the municipal bond issuance size and default rate model range has been studied in-depth analysis of fuzzy uncertainty (Kinght factor) for the impact of default rates were obtained under the bond market sentiment in different size and range of risk selection. This will be more beneficial to the future distribution and the decision-making.Based on the findings, this paper put forward a series of improvements to the fuzzy uncertainty model of municipal bond risk measure, and to the findings made recommendations accordingly.