The Design And The Pricing Model Of The Credit Loan Which Contains A Reverse CDS

Today in the financial market where financial risk becomes moreand more serious, financial risk management has been an importantcurrent work. To every bank, how to reduce the rate of non-performingloans has become the main target of the risk control.In many bank loans,corporate credit loan has already become the crux of bank riskmanagement because it does not have any collateral and pledge andalways includes information asymmetry problem。But with thedevelopment of economy, there will be more and more small and mediumsized enterprises which has relatively little capital and high developingspeed. So there will be a need for more corporate credit loan. And How toreduce the non-performing loan rate of corporate credit loans will be apredictable and meaningful subject.We creatively embed the credit default swap(CDS) into the commoncorporate credit loan to design a new corporate credit loan. Then we showits pricing model. In the paper, we also also introduce the corporatereputation factor as added value for the loan to the enterprisemanagement level, which also promotes the further cooperation of banksand enterprises. Considering that the management level have great controlpower to the corporate and have a good knowledge of the corporate orproject, we bind the bank and corporate management level’s profit withthe CDS. And the CDS won’t spread the risk to other investors, but in turn control and eliminate the risk from the source. So we call the CDS as“the reverse CDS”. The CDS not only can help banks to identifyhigh-quality projects and enterprises to eliminate the adverse effects ofasymmetric information on corporate credit loan, but also in the long termcan reduce the corporate credit loan conditions for the high-qualitycorporate and be conducive to the healthy development of the creditmarket.