A Quantitative Study On Credit Risk Of Chinese Commercial Banking

Credit risk is the oldest risk and one of the most important risk in financial market.It is the primary risk that modern banking are facing.Since the 20th century, the 1990s, in global environments, every country's banks are facing increasing credit risk.Credit risk measurement issues have becoming the most challenging research field of risk subjects in the next few years. However, credit risk measurement and management in risk management of our commercial banks are still weak point.Therefore, this article attempts to have a credit risk study from the aspect of quantitative analysis.Firstly, this article reviewed the related literature of credit risk research, and then summarized credit risk measurement and management, emphasizing on introduction of the basic factors of the portfolio credit risk measurement and formed a framework of portfolio measurement.Secondly, based on the actualities of domestic research on credit risk and the objective conditions our banking possessed in credit risk measurement and management, the ratio of non-performing loan, which is used to evaluate the quality of commercial bank's loan portfolio, is compared with the probability of default, which is one of core conceptions in most advanced credit risk measurement models.Then this article proposed that the prediction of the ratio of non-performing loan can be substituted for the evaluation of the probability of default.The empirical part of this article is the use of technology which internationally accepted measuring portfolio credit risk–Value at Risk(VaR), using Monte Carlo simulation approach to have a analysis and forecasting on the ratio of non-performing loan in our commercial banking(commercial banks).Monte Carlo simulation used four random process to simulate trails of changes in ratio of non-performing loan and got the next period VaR value by forecasting, and theoretically expounded the criterion of choosing optimum simulation path.Finally, in view of the the status quo in credit risk measurement and management of our commercial banks,this article presented some reformational ideas from the institutional construction and technical means of improving our credit risk measurement and proposed some suggestions to improve the demonstration.