Research On Measurement Model Of Credit Risk And Application In China Of KMV Model

The bank undertakes each kind of risk while providing financial products. In the changeable external economic environment and the intense industry competition, the scientific risk management guarantees the bank to stand steady and invincibly. The accurate measurement of the credit risk is advantageous to the safety of the bank's management in the microscopic aspect and the stability of the finance system and the healthy continuous development of economics in the macroscopic one.In our county, the analysis of credit risk proceeded from the property combination is few and just on the qualitative foundation. But in the western countries, the banks have adopted the advanced credit risk measurement models, which evaluate the credit condition of the enterprises using the available information. By these models, the banks increase the capability to manage its risk. With the relaxing of our financial business, the foreign banks will have the same right to compete with the domestic ones and the latter will stand at the disadvantageous position for the comparative backwardness of the risk management. This aim of this article is to develop the risk management technology that is suitable for our banks to stand forward in the competition by analyzing and comparing the modern risk management measurement models.This paper is composed of five chapters:First, we elaborate the background and significance of this topic, introduce the present situation of the research on the credit risk measurement in and abroad and the structure,main content and the methods of this article.The main content of the second part is the credit risk management quantification outline, including the credit risk outline and the necessity of the credit risk measurement theory and usage.We analyze and compare the classical and modern credit risk measurement models, involving the CreditMetrics model, the CreditRisk+ model, the CreditPortfolio View model and the LAS credit loan analysis system. By comparison, we discovered that modern credit risk measurement model with these features and development trends : (1) Transform qualitative to quantitative analysis;(2) Transform indicators to steering model;(3) Transform analysis of individual assets into equity portfolio analysis and so on.The fourth part is the key point of this article. We emphasize the theory and usage of the KMV model. This model is based on options pricing thory, and it takes a company's value and its debt in the future is just like a call options whose primary asset value is greater than its strike price, and the company will carry out this option,which means the company will execute the contract, and vice versa. Meanwhile, the model cinsiders in the modern stock market, any information about macro economic, industry and enterprise conditions will be reflect to the undulation of the stock price, furthermore, which implicates the evidence of changes for the company's credit risk . And at the same time, the KMV model also considers there is a certain relationship betseen the stock price's undulation and that of the company's value connotes. Supposing the company's value satisfies a certain probability distribution, then, we can calculate the company's value in the future as well as its connotative undulation basing on the relationship and a certain option pricing formula, which is based on the supposing talked above. Further, we can calculate the company's expected default frequency. By now, the goal to measuring the company's credit risk has realized.Then we do some demonstration of the credit situation of our listed enterprises by the KMV model and summarize the utilization of the KMV model in our country at the end of this section. The demonstration shows that the KMV model matches the level of our credit risk management and can be used to measure the credit risk of our listed enterprises for the availability of the data and the simplicity of the operation, which has a broad prospect in the field of our credit risk management.The fifth chapter, and at the same time the last chapter of the paper, analyzes the KMV model's excellence and its shortcoming derivate from its property and supposing, and points out KMV model is a feasible model for measuring company's credit risk on condition that our country is short of broad and efficient method for credit risk measurement in present.