The Research On Commercial Bank Loans Pricing Based On The Credit Risk

Along with the wave of financial innovation and financial liberalization within the scope of the world, credit risk is not only an alarming growth in the size of the market, but its complexity is also rising. Credit risk management and pricing increasingly becomes an important subject in the field of financial assets pricing theory research for market participants. Commercial bank loans as the most important assets of the banking business, its pricing is reasonable or not directly related to the earnings of the bank and its overall competitiveness. The steady implementation of the marketization of interest rates and the banking market open to the outside world have provided a solid macroeconomic environment and system background for the independently loan pricing of Chinese commercial banks. Therefore, establishing science and credit risk based commercial bank loan pricing model, so that the lending rates not only reasonably reflect the risk borne by the banks, but also can improve the competitiveness of their loan products, and it has very important practical significance in raising the bank operating performance and its overall competitiveness.No-arbitrage pricing theory believes that people are rational, risk-free arbitrage opportunity in the market will eventually disappear, the expected profit of assets in the future after the discount must equivalent to its value in the now time, investors can not get more than the market gains. Therefore, the key to the no-arbitrage pricing theory is to finding a risk-neutral probability measure, and then under this probability measure, investors become risk-neutral, that is, for any level of risk assets, investors only require an risk-free receipts. Thus, the pricing of risk assets has become extremely simple, under this measure, the expected value of risk assets in the future after discounted by the risk-free interest rate will equal to its current price. Structural model and compact model of the credit risk pricing have respectively defined their enterprise risk-neutral default probability, and then using the no-arbitrage pricing methods to obtain the price of credit-risk assets. Structural model defines default as the enterprise assets drops to a boundary value, and making the model heavily depend on the assets structure of the enterprise and the assumption that the enterprise assets value subjects to the diffusion process, so that the applicability of model is not strong. The compact model defines default as an unpredictable Poisson events which is decided by the exogenous intensity, it eliminates the dependence on the assets structure of the enterprise and also abandons the assumption that the assets value subjects to the diffusion process, so as to solve the problem of short time frame and no accident default which exist in structural model.Credit risk pricing method has been applied to the research of commercial bank loan pricing and has resulted in two mail models: the Structural loan pricing model which based on the structure of the enterprise assets value(that is, KMV model) and the Reduced loan pricing model which based on the strength of corporate default(that is, Turnbull model). In this paper, we use a Structured Risk Model which integrates the advantages of Structural Model and Reduced Model to determine the price of the enterprise risk zero-coupon bonds, and then establish a commercial bank spot loan pricing model that based on the credit risk. Structured Risk Model provides that default occurred when the enterprise assets value downed to a random losses, it reveals the inner mechanism of default; but in determining the probability of default, it also assumes an losses incident of exponential distribution to get a special structural risk process; the process precisely reflect the default mechanism of the Structural Model, that is using Reduced method to reflect the default of Structure Model, making it combines the advantages of both. After determining the risk-neutral default probability, we can use no-arbitrage pricing method to get the price of the enterprise risk zero-coupon bonds; on this basis, this paper based on Turnbull Model method—use the risk zero-coupon bond prices of corresponding term structure as the discounted factor, then the future cash flow which is produced from bank loans is discounted by the factor, as a result, it equals to the present value of the principal of the loans, at last, we get the capital preservation rate of the bank spot loan which is based on the credit risk. As we establish the long-term loan pricing model based on the credit transfer matrix, we use credit transfer probability based on the credit rating to reflect the dynamic change process of enterprise default, then we use Reduced Model to determine the immediate risk-neutral default probability, again combination it with the method provided by Kijima which can change the credit transfer probability under the real measure into the one under the risk-neutral probability measure, then through recursive manner, we get the long-term risk-neutral default probability, at last, under the no-arbitrage pricing method, we obtain the capital preservation interest rate of long-term bank loan which is based on credit transfer matrix.