The Research On Dynamic Pricing Method Of Bank's Loan Based On Credit Grade Evaluation

With the opening schedule of our country's financial service market comes closer and closer after we joining into WTO, the competition among financial institutions becomes fiercer; Bank's payoff space shrinks due to the reduced margin between deposit and loan rate which is the major resource of bank's profit. At the same time, with the interest marketilization revolutionized deeper, banks will own the self-determination right on deposit and loan pricing which they have never have. These all urged the commercial banks to carry on financial innovation on loan pricing ceaselessly. This dissertation intended to grasp the problem that is desiderated to solve by banks nowadays. In this paper, through using the foreign idea of pricing loan based on the changes of corporate performances as reference, it formed a whole dynamic loan pricing mechanism suits for our country's reality and made it known from other static pricing methods greatly so as to provide some theoretical support for our banks to transform from loan risk management system which made the loan-risk-degree management as the core to loan risk prosecution mechanism which made the loan pricing as the core.Firstly, this paper gave a brevity discussion on the principle and the fundamentals of loan pricing and analyzed the major factors that influence the pricing. Then it introduced and made comment on three major traditional loan pricing model of foreign commercial banks. Based on that, through summing up the traditional pricing models as the fixed-rate pricing strategy and making analysis on the contracting problems they met in the loan pricing process as well as the limits when they solve the problems, the paper compared these aspects with the dynamic methods and dig out the economic role and characteristics of dynamic pricing in debt contract. That is, this ex ante contracting reduces a lender's potential exposure. It does this directly by reducing recontracting costs and indirectly by reducing moral hazard and adverse selection costs. This is also why I made research on this pricing method.Secondly, this paper centralized the research on the material method of how to price the loan dynamicly. After introducing borrower's credit grade as the credit risk proxy, the paper conceived the bank's internal credit rating system and through integrating various factors the traditional pricing method took into account, it confirmed benchmark rate of loan. Then it utilized M-T-M model to evaluate loan future value during the period of loan in order to ascertain loan's credit "loss" and "proceeds". Furthermore, through using the connection between loan-risk-degree and loan risk premium, this paper amended the model to make it more suits for our country's reality.These parts constituted dynamic pricing mechanism.At last, based on the method research, the paper selected real case to verify the application during the practice of loan pricing and made an overall analysis. From this, it validated that the dynamic method is an effective approach for loan pricing.