Evaluation On Industries Credit Based On KMV Model

Credit is the basic characteristic and demand of market economy. And credit risks and market economy are coming like the shadow following the form. Under the integration of global economic, the outburst of international financial crisis highlight the highly relevancy, systematicness and enormous destruction of all kinds of credit risks. At the same time, the strengthen of the control of credit risks has already become the eternal theme of the financial world. As the quick development of financial innovation and credit derived work, the credit metrics method based on the math model that can reveal and forecast the credit are more and more important.Firstly, the essay speak on the credit risk theory and credit metrics, introduce the principle,content and method of KMV model. Secondly, it also makes empirical research of industry divergence of KMV credit model. We choose the companies in stork market as object of study, start with the ignorance of industrial in KMV, make empirical research on 24 quoted company in 4 different industries, at last we draw the conclusion that there are significant divergent results in different industries in application of KMV model.Then we choose Financial Indicator as the variable to build regression model, analyze the influencing factor that leading to the industrial divergence and give the summary of research and reasonable explanation. At last we give some investment evaluations and policy advices presently according to industry and risk characteristics.The demonstration of divergence between different industries indicates that the default distance of different industries exist the prominent diversity, and this kind of diversity could show by the financial index. But as to the same financial index, the influence of them to default of different industries is limit. So we could consider both the default and financial index when we measure the credit risk in order to reduce the influence of errors. we hope to have a better understanding of Predictive power, the scope of application,industry discrepancy of the KMV model, if necessary, provide some reference materials for financial institution and investor.