Research On Credit Risk Measurement Of Exchangeable Bonds

In recent years,with the rapid development of China’s bond market,bond credit risks have accumulated in large quantities,and default events have occurred frequently.As a kind of structured bonds with options,exchangeable bonds,which have a short development time in China,have also been several material default events.By the end of 2022,the number of exchangeable bonds in default has reached 4.97% of all,which has caused certain obstacles to the effective functioning of this securities and the healthy development of the bond marketUnder this background,based on the characteristics of exchangeable bonds,especially the dual attributes of "debenture" and "option",according to the implicit definition of credit risk of exchangeable bonds,this paper comprehensively identifies the risk factors that cause default from the perspectives of issuing subject,exchangeable bonds design,underlying stock,etc.This paper holds the belief that the core reason for the credit risk of exchangeable bonds is the decline of the capacity to meet obligations,and the direct reason is the low chance of conversion caused by interaction between the bond design and the underlying stock.Based on this view,this paper further introduces the Logistic basic method through analysis and comparison,and designs a risk measurement model that conforms to the actual situation of China’s exchangeable bonds.On the one hand,the measurement model incorporates indicators that could reflect the capacity to meet obligations of the issuing entity,and on the other hand,it also incorporates indicators of conversion chance,which are constructed from the perspectives of whether the option could be exercised and whether the stock could be smoothly converted after exercise,on the premise of transforming the issue of bond exchange into the issue of European option exercise.In order to improve the stability of the model and the accuracy of prediction,factor analysis is used to extract proxy variables for selected indicators and incorporate them into the model.This paper takes exchangeable bonds with public information as samples,and conducts empirical simulation on the constructed model,thus completing the construction of the credit risk measurement model.Based on the measurement model,this paper conducts an effectiveness test.The test results show that the constructed credit risk measurement model of exchangeable bonds has certain economic significance,and both the issuer’s capacity to meet obligation and the chance of stock conversion have a significant impact on the credit risk of bonds.In addition,the model could also be applied well,and fully extract information about the credit risk of exchangeable bonds.Meanwhile,the stability of the model and the accuracy of the measurement results are also relatively well,which could provide a basis for measuring and evaluating the credit risk of exchangeable bonds,and play an early warning role in bond default events.