The Study On Credit Risk Measurement And It's Application Based On Structural Model

This dissertation analyzed how to apply the basic rules of structural models to the credit risk management practices in Chinese domestic banks. The existing structural models were mainly built for bonds investors in well-developed financial markets. Although the nature of credit risk of the domestic banks is the same as that of foreign bonds investors, the market and information environment in China is quite different. Therefore, the first objective of this work is to build a theoretical structural model adaptive to Chinese market characters. In practice, the domestic banks'techniques used in credit risk pricing and credit limits calculations were out of date and can't satisfy the banks'market development and risk management. So, the second objective is to bring forward advanced techniques resolvents.Firstly, this paper developed a basic analysis framework of a structural model including the conceptual framework, the model hypothesis and a generalized traditional model (called'basic model') to calculate probability of default (PD). It showed that the structural model is consistent with the basic rules of internal rating-based approaches and is applicable to the banks'credit risk management.Secondly, a specified structural model of probability of default (called'noisy model') was brought forward which had a new noisy information hypothesis consistent with Chinese loan markets'situation. The hypotheses were based on domestic banks'information environment and their ways to acquire infomation. The following is an empirical analysis based on Chinese banks'practical data. The result showed that: the predictions power of noisy model was better than those of basic model and Z'score model; the information distortion of companies'financial reports to the banks were seriously and the companies prefer to overstating their credit quality.Then, on the base of the structural model, the impacts of debt maturity on marginal probability of default and its curve were systematically analyzed through analytical approaches and scenario approaches. We found that: when the companies'risk increase, the short-term PD increases accordingly, but the medium and long-term PD increase first and then decrease; while the impacts of noise on short-term PD was very obviously, its impacts on medium and long term PD were mild. According to these findings, a new pricing method of medium-long term credit risk was derived, which reflects the impact of the debt maturity more precisely.Finally, the impact of capital structure on PD was analyzed and it is found out that: the PD increases in line with the componies'debt rate increase. Then, a new calculating approach of credit limit was presented, which considered both the companies'debt capacity and banks'risk attitude and linked the credit limits with the PD directly. It has a sounder theoretical foundation and is more intuitionistic and operational.