Research on CDS Spread of Credit Bonds in China Based on Vasicek Model

摘要

For measing the CDS spread of credit bond market in China, the CDS spread measuring method on credit bonds is proposed based on the non-arbitrage pricing principle. In this method, the Vasicek model is introduced to model the dynamic process of default intensity of underlying credit bonds, and the parameters of the model are estimated by using the credit bond market data in China. This method makes the default process of underlying credit bonds more practical. The reasonableness is further analyzed by simulating experiments. Moreover, through the sensitivity analysis and stress testing, the effect of each parameter on the CDS spread is explored. Results show that the proposed method is valid and reasonable for measuring the CDS spread on credit bonds in China.