Credit Derivatives In Dommercial Bank Credit Risk Management Application

Credit risk is the most important risk that the commercial banks are facing.The method of credit risk management has experienced from classical credit management to modern credit management which uses the engineering technology.Credit derivatives,the latest product of modern credit management,can price and transfer the credit risk,which helps commercial banks to decentralize the excessive concentration of credit risk without hurting the existing customer relationship.In the practice of developed countries,credit derivatives have been proved to be effective tools of credit risk management.The level of credit risk management of commercial banks in China is quite low compared to developed countries.And the banks are faced with fierce competition from foreign banks now.Credit derivatives relative to the traditional methods,such as the sale of bad assets and securitization of loans,have a clear advantage.So when the financial market is ripe,the introduction of credit derivatives to enhance the credit risk management level of commercial banks in our country is quite significant.In this paper,the structure,pricing methods and the role of credit derivatives are deeply studied.According to the credit risk management state of commercial banks in China,the paper elaborates the necessity and prospects of credit derivatives.As for the choice of credit derivatives,the suitable pricing model and building infrastructure, this paper also gives suggestions.Credit derivatives are expected to play an important role in credit risk management.