Credit Risk Assessment Based On The KMV Model

Credit risk is one of the most important and oldest risks in financial market. Credit risk in the banking has become the main reason for bankruptcy. All banks and investors have to face the unprecedented challenge. Based on character of China capital market and ROC method, we got the most suitable parameters for KMV model. We used two methods for evaluating non-tradable stock price, one is profits ratio method, the other is net assets method. As a result, profits ratio method show higher performance. We got the best default point is current liabilities. Under 5% of significant level, we did wilcox test for the average default distance of default group and non-default group, the result shows that two groups have significant difference. On the analysis of distance default, the result shows the bigger company is the smaller default risk will be. Share reform has an impact on credit risk of Shanghai and Shenzhen 300 listed companies. On the factors analysis on impact default, Fluctuations in the value of equity has the greatest impact on the default, the greater the volatility is the greater the likelihood of default will be. Between Default distance and the rate of assets and liabilities has positive correlation, the other financial indicators, such as asset, net assets per share, etc has negative correlation. We did detailed analysis on the relationship between economic content of financial indicators and credit risk.