Application Research Of KMV Model In Commercial Bank's Risk Management

The indirect financing still is the main enterprise-financing mode in China due to divided professional management, immature interest rate marketization and undeveloped capital market. So the credit risk becomes one of main risks that China's commercial banks face. Accurate measurement and effective management of the credit risk, which become not only the key factor for risk recognition, evaluation, precaution and controlling in commercial banks, but also the foundation for risk supervising and management of the supervisor authority. So the accurate measurement of the credit risk is the key factor for the credit risk management.The traditional measure and management method of credit risk have not only been able to adapt the new situation and the new question which arises in today's society, but also cannot satisfy what is needed in the scientific quantification measure and the effective management of the credit risk. The banking industry in the western developed country has already introduced the great advanced internal credit risk measure model which use all information what can be obtained to valuate the enterprise credit condition. Compared with the West commercial bank's credit risk management level, there still are a great gap between domestic bank and west commercial band,especially in risk quantification aspect disparity. As far as our country's commercial bank is concerned, the bank internal rating is still in initial stage,internal rating system which the commercial bank develops mainly uses customer selection and risk warning, not yet use credit risk quantification management. Therefore, with the financial mechanism reform and financial opening step speeding up, commercial bank's risk management consciousness obviously has been strengthened, the banking industry have progressively realized the importance of the marketability operation, prudent operation and risk management on banking industry. We need to reevaluate the credit risk measure and the management method, establishing the new measure model that is suitable our country's credit risk management level.This paper takes the commercial bank credit risk measurement and the management as the research direction, presenting the traditional credit risk method and the modern credit risk model, mainly introduces the KMV model's theory frame and revises the model based on the present situation of our country banking to makethe model follow the credit risk condition of our country. As the model is especially suitable for the credit risk measurement of listed company, this paper makes the empirical analysis about the actual measurement effect of the KMV model based the data of listed company, through the empirical analysis, pointing out that the revised model has obvious credit risk measurement function. Finally, the author proposes policy suggestion on the model application and looks forward to the application prospect in the future. Therefore, this paper includes 6 chapters.First chapter is the paper introductory, in this chapter, the author introduce the research background, research method, research difficulty and the literature review. Second chapter is about the credit risk presentation, in this chapter, the author defines the conception of credit risk ,the classification and the measure method, mainly introducing basic theory, computation step and the advantages and disadvantage of the traditional credit risk model and the modern credit model . Third chapter is about the KMV model theory, in this chapter, the author recommends KMV model theory frame, the core thought and the parameter estimation method.Fourth chapter is mainly about the KMV model's applicability on credit risk measurement of listed company, in this chapter, including the model's advantage and disadvantage and the revised model's applicability.Fifth chapter is about KMV model application analysis in commercial bank risk management,in this chapter, including KMV model application on expected default frequency, internal rating and bank risk loan pricing,and introducing the actual application experience in Enron company's bankruptcy.Sixth chapter is about KMV model empirical research on the basis of the listed company of our country,in this chapter ,the author clarifies the computation process of the model and obtains the empirical results of empirical analysis, also finds some question in practical application and explains these question.Seventh chapter is about policy suggestion on the KMV model application and the application prospect in the future.