Analysis Of The SMEAB’s Advantage And Pricing Model

Small and Medium Enterprise Assemble Bond(SMEAB) is one of the innovative financial products in China, which is designed for the medium-sized and small enterprises. This paper make a discussion on the topic of financing dilemmas and financing methods about SMEs around the world, firstly, and summarize the existing related studies about SMEAB, then make a analysis of the two main advantages---saving the cost of signal and credit enhancement. At the last of the paper, give the basic pricing formula about the SMEAB which include as the put provision.In the part of advantages analysis of the SMEAB, by using the Von Neumann-Morgenstern model, get the conclusion that the problem of adverse selection is very popular in the financing process. Then through the Leland-Pyle model (1977), we can get that SMEAB has the advantage in saving the cost of signal. For the advantage of credit enhancement, this paper making the analysis from the perspective of the characters of its own, rather the "constructing the credit chain among different enterprises". And we will find that the default rate of the whole SMEAB is far below the whole rate that every enterprises issue the bonds independently. In the part of pricing of the SMEAB, this paper takes the new element, the put provision, in the pricing model. Basis on making some assumptions about the clauses of the SMEAB, get the basic pricing formula about the SMEAB which include the put provision. In the end of this paper, we take the "10zhongguancun" bond as the example and get the theoretical value through our pricing formula.