Research On The Credit Allocation Of Housing Mortgage Loan Based On Default Correlation

As the development of the real estate industry, the potential risk of commercial banks on personal housing mortgage loan business is increasing. For better risk management and credit allocation on personal housing mortgage loan, the research of credit allocation of loan based on Credit Risk+model was conducted in this paper.Credit Risk+model, which is based on actuarial theory, can measure the expected loss and unexpected loss according to default or not. Credit Risk+model has also been studies, but risk management and resource allocation of commercial banks based on default correlation of personal mortgage loan is still waiting for research.Methodology:Aimed at improving the efficiency of fund utilization of commercial banks and avoiding risk, Credit Risk+model was used to measure the risk of housing mortgage loans of commercial banks under a constant default rate. Date of default possibility and risk disclosure of individual loans was used to calculate the loss distribution and value in risk of portfolio. As a result, optimized allocation was proposed based on optimization model according to the goal of maximizing earnings per risk or expected earnings.Results:The result of empirical analysis shows that the overall default distribution subject to Poisson distribution with fat-tiredness under the condition that individual default possibility remains constant and independent within research period. Moreover, reasonable resource allocation could be gained efficiently based on particular optimization target. Solutions, which present the optimized resource allocation strategy, according to different optimization targets:maximizing earnings per risk and maximizing expected earnings were made under the same constrain condition. The solutions and the methodology of solutions provide an efficient way of quantitative analysis for risk management and resource allocation of commercial banks.