A Study On The Determinants Of The Issuing Interest Rate Of Asset Securitization Products In China

The asset securitization product was first born in the United States in the early1970 s.With an ingenious structure design,the asset securitization products have some favorable attributes of credit enhancement,risk isolation,improvement of liquidity and low financing cost.In the peak period,the issuance of securitized products accounted for the highest share of the fixed income market in the US and played a positive role in the prosperity of the US financial market.In China,the asset securitization market appeared in 2005.Although experienced a temporal suspension during the period of the financial crisis from 2008 to 2011,the market was steadily built and attracted much attention of regulators and scholars.In2012,three modes of asset securitization were developed considering the characteristics of the market in China: China Banking Regulatory Commission in charge of the securitization of credit assets,China Securities Regulatory Commission in charge of the securitization of the enterprise asset securitization,and the National Association of Securities Dealers in charge of the asset-backed paper.After resumed in 2012,the asset securitization market started to grow explosively.The issuance amount keeps touching the records because of the increasing abundance of the basic asset types in asset securitization.In 2017,the issuance of domestic asset securitization products reached 1.4 trillion yuan.With the additional supports from the Chinese government in the real economy,the inventory of stock assets,and the reduction of leverage,a further development of the asset securitization could be expected in China.However,unlike the US market,the asset securitization market in China is still in an early stage.A series of policies and measures are in progress of further improvement.China has not implemented interest rate liberalization,sufficient early compensation rate,default rate,and other data accumulation for pricing models.This makes the domestic pricing methods difficult to be applied.Current research on the asset securitization mainly focuses on building new theoretical risk control and pricing models.However,few studies have done empirical analyses on these models.This study carries out an empirical analysis on the outstanding products,focusing on finding the determinants of the issuing interest rate of the domestic asset securitization products in China.The purpose of this paper is to provide a reference for a healthy future development of the asset securitization market in China.We first reviews the literature on the current situation of the development of asset securitization market in China and the United States.Then,we build a theoretical model to analyze the main determinants of the issuing interest rate of the Asset Backed Securities(ABS)and the Collaterized Loan Obligation(CLO).For the next,we carry out an empirical analysis using data on the collection and arrangement of assetsecuritization products issued since 2012.We use the OLS+ robust standard error regression and FGLS regression to identify the factors that have significant impact on product pricing of ABS and CLO.The explanatory factors include the common factors of bond pricing,the specific factors of the partial asset securitization products and the macroeconomic factors.Our sample contains each layered product of the enterprise asset backed securities and the credit asset backed securities issued from January 1,2012 to December 31,2017.The final results from both the OLS+ robust standard error regression and the FGLS show a significant difference between the determinants of the issuing interest rate of two types of asset securitization products.