Application Study On Credit Derivatives In The Credit Risk Management Of The Commercial Bank Of China

Credit risk is the major risk that the commercial banks of China face and is the main factor of the financial risks of China at present. Holding maturity has long been the main method for the credit asset management in the commercial banks of China. However, it is difficult for the commercial banks to confront actively credit risk with this method alone. Nowadays, the more and more serious risks which the banks have faced make the carrying expiration no longer an effective method to distribute credit risk. Under such conditions, it is in great need to find a suitable method for credit risk management. The giant banks around the world have employed all sorts of positive credit risk management methods, which are usually based on the changes of borrowers and markets. These methods can help to distribute credit risk and to maintain and even increase the values of the credit asset. In this dissertation, a brand-new tool for credit risk management, credit derivatives, is introduced and its applications to credit risk management in China are investigated, analyzed and discussed. We conclude that credit derivatives are an effective method to provide a new idea for active credit risk management.On the basis of absorbing and using for reference which are from foreign and domestic correlative theory study, starting from the feature of credit risk, this dissertation focuses on the research of the analyses, measurement and application of credit derivatives in the commercial banks of China. First, the dissertation expounds particularly the relevant conceptions about credit risk management and credit derivatives. According to the actuality of credit risk management in the commercial banks of China, we band them together further and expound how to improve the ability of managing credit risk of the commercial banks of China. Then we turn to the core of this dissertation: the pricing of the product. The pricing of credit derivatives is materially pricing credit risk. Let credit default swap that is the most representative one of credit derivatives take an example in the dissertation. Based on the basic principle of credit default swap, this dissertation analyses the value of credit default swap in terms of its cash flow for this core problem. Furthermore, the dissertation uses the risk neutral theory, and develops the basic model for credit default swap on the basis of the recovery structure of face value. Numerical analysis is conducted and the feasibility of the proposed method is validated primarily. At last, according to the basic principles of the application of credit derivatives and the actual condition of the commercial banks of China, this dissertation puts forward to specific ideas that the commercial banks of China use credit derivatives. Then some reasonable suggestions are proposed for the application of credit derivatives in the national condition of China from macroscopic aspect and microscopic aspect.