Study On The Pricing And Valuation Of Offshore Green Bond Issuance

China’s achievements in sustainable development can only be achieved with the strong support of the financial markets,with the bond market playing a particularly critical role.Although the green bond market started late in China,it has developed rapidly and accumulated many practical cases in a short period.In July 2022,the release of the China Green Bond Principles re-standardized and unified the confusing industry standards in China,thus making the supporting system of the market more perfect.Therefore,the green bond market has high research value and reference significance for developing macroeconomic and financial markets.Since the first offshore green bond was issued in July 2015,although the number of offshore green bonds issued by domestic entities has increased rapidly,the issuing entities are still mainly commercial banks,especially state-owned banks and large joint-stock banks.As a leader in this field,the Bank of China is the first financial institution to issue overseas green bonds successfully.It has set several domestic records regarding the number of issues,varieties,scale,and regions involved.The analysis of the Bank of China’s overseas green bond issuance will be of high reference value to other Chinese entities issuing green bonds overseas and is also of great significance to the development of the domestic green bond market.Chapter 2 introduces the issuance of green bonds in China from seven aspects:issuance scale,industry distribution,issuance type,issuance term,financing cost,evaluation and certification,and issuance underwriting.Chapter 3 introduces the issuance of green bonds outside of China from five aspects:issuance scale,trading venues,issuing entities,issuing currencies,and major issuers in various fields.Comparing the issuance data in China and abroad,it is found that there is a considerable gap between the size of the overseas market and the domestic market.Still,the development has been very rapid in recent years.After analyzing the overseas issuance data in detail,it is found that the Bank of China ranks at the top in various statistics.The statistical analysis results are promising to explain the basis for selecting the research direction of this paper and further analyze the difficulties of green bond valuation accordingly.Starting from Chapter 4,the article enters the stage of empirical analysis.To accurately calculate the theoretical value of green bonds,their value is subdivided into fixed and floating values.The fixed part possesses the characteristics of ordinary bonds,and all future cash flows are discounted and summed using the discounted cash flow estimation method(DCF).The floating value,which possesses the characteristics of an option,is estimated using the B-S model modified by the fractal Brownian motion(FBM)model that introduces the Hurst index and the traditional binomial tree model.In the calculation using the valuation model,the ARMA(1,2)-GARCH(1,1)model is constructed to predict the annualized volatility of the underlying asset value δ considering the dynamic uncertainty of the value of the model variable.After completing the necessary econometric tests in the empirical process,the fixed and floating values are summed to be the theoretical value of the green bond.Finally,the traditional B-S model containing volatility δ forecasts and the B-S model modified by the FBM model are used to value the green bonds issued by BOC Singapore in April 2022,respectively.The estimated values of the binomial tree models(European and American)are used as the control criteria.It is found that no matter which method is used for valuation,the actual issue price is always lower than that obtained by the four different valuation methods.The theoretical value of the issue price is underestimated.The valuation of the American option is slightly higher than that of the European option,i.e.,the distinction between the types of options to which they belong also affects the valuation of green bonds.In the light of the development of the green bond market outside China and the construction process of the model,we analyze and explain the underestimated issue price,and make recommendations on the pricing of green bond issues from the perspectives of the government and the issuing entities represented by the Chinese bank,namely,the government should enrich the types of issuing entities,unify the standards related to domestic and foreign issues as soon as possible,improve the internationalization of domestic rating agencies,and The government should enrich the types of issuing entities,unify the standards of domestic and foreign issuance as soon as possible,improve the internationalization level of domestic rating agencies,and form a credit enhancement mechanism to reduce the difficulty of registration and filing for overseas issuance;the issuing entities represented by the Chinese government should optimize the investment structure of the funds raised,make full use of the international platform to strengthen cooperation,innovate the types of green bond products,enhance the fit between overseas green finance and domestic carbon peaking and carbon neutrality(referred to as "double carbon"),and cultivate the domestic and foreign currency green bond market.