The Principle Of Option Pricing The Default Risk Of Credit Spreads

"Credit risk assessment" has been closely linked with economic activity, and is becoming an indispensable part of the economic activity chain. Traditional credit risk measurement approach has failed to meet people's needs. How to establish an effective risk measurement models and risk management model is an important problem for mathematical finance theory and practice.This paper has described the behavior of stock prices, introduced the Black-Scholes differential equation, analyzed two types of special pricing options by the use of option pricing theory, namely stock 0-1 options and cash 0-1 options, and set up the pricing formula. Its option pricing and the smallest hedging strategies were analyzed and forecasted in the complete binomial market. We showed this by the analysis of an example of the European-style call option.Then we evaluated risk bonds and measured their credit risk by the use of option pricing theory, founded an expected default model. So objectively obtain a risk value of financial product or financial items. The BM model were built up based on the KMV model, this model can compute the expected probability of default that the dissimilarity expires time to break.At last we analysis the credit risk of a devaluation of listed companies by the use of option pricing theory based on the KMV model. Improved the methods to assess credit spread based on expected losses from the default risk, and then we established a more feasible method. Finally, we measured credit risk of the listed company by processing their data, calculated risk credit spread to assess their credit risk. Intuitionist analysis and compared with these various methods from the diagram which was made by the Mathematic software. It has shown that this model has a strong convincing to devaluate the credit risk.