An Empirical Study On The Pricing Of Collateralized Loan Obligations Of Chinese Commercial Banks

As an innovative tool in financial market,asset securitization products can transform illiquid assets into securities which circulate in secondary market,and help enterprises to finance at lower cost through risk transfer and allocation.Therefore,since its first appearance in the 1970s,asset securitization has become an important part of the capital market.The asset securitization started relatively late in China.At the same time,due to the imperfect development of capital market,the development of asset securitization has experienced several twists and turns.However,since the resumption in 2012,the types and quantity of asset-backed securities(ABS)are increasing,the participants and investors in the transaction are becoming more and more diversified,and the importance of ABS as a direct financing tool in the capital market is also increasing.It is of great significance for the development of the market to accurately price ABS.The Collateralized Loan Obligation(CLO)is an important branch of asset securitization product and the initiator are mainly commercial banks.While previous studies focused only on the pricing analysis of one CLO product,this paper chooses 61 CLOs issued from 2016 to 2018 as the research object,and explores the influencing factors of the issuance interest rate(coupon).Firstly,the KMV model is used to estimate the default probability of each underlying asset in the asset pool,and the default time of each tranche of the product is estimated by combining the Gaussian Copula and student t Copula functions.According to the no-arbitrage theory,139 fair premiums are calculated for each tranche of the product.Finally,the regression analysis is established to explore the influencing factors of the pricing of CLO products issued by commercial banks in China,taking the coupon of each tranche of the product as the explained variable,the fair premium as the control variable,the credit level of the bank,the external rating of the product,and the degree of the area and industry concentration of the asset pool as the explanatory variable.The results show that,external credit ratings and fair premium of the product can capture similar information.After controlling the fair premium,the information such as the issuance of the bank’s first CLO product,the degree of regional and the industry concentration of asset pool,and the maturity of the product still significantly affect the coupon of products.Because of the risk segregation brought by the transaction structure of CLO products,the credit level of the bank does not influence the coupon of the CLO product significantly.