SMEs, Borrowing Constrains and Financial Innovation In China
Three new cluster bonds have been isseued in China as the financial innovation to conquer the SME’s borrowing constrains. SMEs issued the cluster bonds as a group to the outside investors have gained great success. However the pricing mechanism of this new financial technology is still under the research. We made the logical pricing model of credit spread by a geometrical attenuation function reflecting the unexpected default of intensities. Then, we designed a pricing model of small-medium corporate cluster bonds with the spot interest rate assumed to follow Vasicek model. Finally, we tested the pricing model with one thousand times Monte Carlo methods and offered theoretical background and empirical evidence for financial innovation as well.
Q. Zhang "SMEs, Borrowing Constrains and Financial Innovation In China", Advanced Materials Research, Vols. 108-111, pp. 303-310, 2010