Guarantee Risk Measure Dependent Breach Of Listed Companies

Guarantee behaviors of listed companies become more and more common, and the amount is huge. Guarantee has been the important tool to raise funds, which is good for the development of companies. But its risk can't be ignored. The faults and cases caused by guarantee have an increasing tendency, moreover, security rings appear frequently. All of those destroy the financial security, so we shall measure the risk of the guarantee.In the quantitative measurement of the security risk, the traditional approach is to consider the financial risk of the enterprises secured in isolation. While in this article, it studies the default risk of guarantor enterprises with correlated defaults. First of all, it analyzes the risk sources , causes and mechanism of transfer; then chooses a suitable model to measure the guarantee risk, it introduces the method of correlated defaults and its superiority, besides, compares three well-known credit risk models: structural models, reduced form models and hybrid models. It points out to unite the hybrid model with Frank copula to measure the default risk. Finally, Applying this model to the selected samples of guaranteeing corporations, and calculating their default probabilities. It measures the guarantee risk in this way.The conclusion shows that: the hybrid model based on copula can predict the default probabilities of listed companies secured well, and we can do the credit rating according to the results. In the sensitivity analysis, it can be found that the default probabilities are sensitive to volatility, risk-free interest rate and correlated structure. As the volatility increases, probabilities grow in number, but the margin is getting smaller and smaller. Besides, default probabilities change with the correlation coefficient in the same direction. And probabilities based on positive default dependency is higher than those based on negative default dependency. This can provide a reference for banks and investors to make risk management.