Home Credit Consumer Finance Co.,Ltd. Personal Consumption Loan ABS Pricing Research

In recent years,benefiting from the concept of advanced consumption of contemporary residents,short-term consumer loans have risen rapidly.Credit loan ABS based on personal consumer loans have become the high-quality basic assets pursued by securitization by virtue of its advantages of high dispersion and strong homogeneity.Consumer finance companies have expanded financing channels through the securitization of personal consumer loans.However,due to the high opacity of information in China’s ABS market,imperfect relevant databases,and interest rate liberalization has not been fully liberalized,the imprecise pricing of personal consumer loan ABS still exists.This problem will not only increase the financing cost of consumer finance companies,but also make investors unable to accurately judge the investment value of products and reduce product transactions.Thus further affecting the development of consumer finance company.Therefore,in order to better understand the personal consumption loan asset securitization pricing situation,the Jieying product of Home Credit Consumer Finance Company,which is rich in issuance experience and relatively mature ABS products,is selected as a typical case.Based on its basic assets,transaction structure and risk status,the reasonable valuation of prepayment rate and default rate is the key to accurately estimating cash flow.Based on the cash flow data,the static spread method including option compensation and the OAS method based on Monte Carlo simulation are used to estimate the pricing interval,and the OAS is reversed at the same time.It is concluded that: The pricing result of both methods is higher than the actual issue price,but the latter’s pricing result is closer to the actual transaction price than the former;the second is that the issuance interest rate is relatively high and the product has investment value;the last,there is a bias in the actual transaction price that create investment opportunities for investors.There are reasons for pricing errors: on the one hand,Home Credit Consumer Finance Company’s qualification and market recognition is not high.On the other hand,interest rates have not yet been fully marketized,resulting in model and data forecast deviations.In the end,it can be concluded that the difficulties in the development of consumer finance industry and the ABS market,and puts forward suggestions and prospects from the consumer finance company and bond market levels respectively.