The Credit Risk Of Financial Leasing Based On Markov Chain

Financial leasing is product of the development of world's financial industry and it is the new-style financial business produced by real credit combining with bank credit under the conditions of modern production. Financial leasing has been spread wider and wider as its birth for its superior advantage, and became the second important approach to get new equipments in some advanced countries. Since 1980s, The Chinese financial leasing industry has come through the difficult process from planning economy to market economy which makes the risk of the financial leasing much larger, so the development of financial leasing went much slower.The main idea of this paper is how to effectively quantify and transfer the credit default risk of financial leasing, which is the key factors of fast and healthy development of financial leasing.Firstly, this paper researches the development of the credit risk of financial leasing; Secondly, from the credit transition matrix presented by Markov chain to the theory of pricing risk bond, this paper studies the credit risk of financial leasing with the assumption of putting the default risk as the exogenous variables; Finally, after quantifying the financial leasing credit default risks, from the view of the lessor, a transfer of default risk of credit default is necessary to purchase in order to transfer the risk to the secured party effectively.