Quantitative Management On The Credit Risk Of Consumer Credit

In the recent years, with the rapid development of consumer credit, people began to pay more and more attention on the control and management of the credit risk. Besides the traditional credit analysis methods, some quantitative management models have been developed by many institutions. Credit Metrics developed by J.P. Morgan and several other international banks is the first one among that sort of quantitative management models. Based on the portfolio and VaR theories, Credit Metrics can help recognize the credit risk of the traditional investment tools such as loans, bonds and etc. by considering the migration of the credit risk.In this paper, based on J.P. Morgan's Credit Metrics and VaR method, we discuss a contract on auto loan. All parameters datum come from the J.P. Morgan's CreditMetricsTM-Technical Document and we analyze the credit risk of consumer loans by standard deviation, relative VaR and percentile level. Furthermore, we will study on the impact of the different initial credit states and how to return the loan on the final result of credit risk.In the end, we can find that Credit Metrics is a kink of feasible tool in the management of the credit risk of commercial banks; however, we don't have the powerful statistical datum and credit systems so that it is hard to implement the quantitative management on the credit risk. Therefore, we still have a long way to go.