Credit Risk Is The Measure Of The Choice Of Financial Indicators

How to measure credit risk is one of the tough topics in credit risk management. This dissertation solves the problem by measuring financial position, which is shown by financial index, to compute default ratio.First, the process of default ratio model based on option-pricing theory was detailedly deduced and its applicability in China was analyzed and tested by taking the finances of sixteen ST companies with default-record and the same amounts of 180 sample stocks listed in SSE (Shanghai Stock Exchange) in the same vocations as an example, and using the methods of cross-section comparison and time series comparison. By means of such default ratio model, not only default companies and credit companies can be recognized successfully, but also default action can be predicted one and a half years in advance.Then, the default ratios of 45 ST-companies are computed and 37 potential financial index are selected referred by researches on financial distress at home and abroad. Finally, the equation of default ratio is produced by stepwise regression, and three of the basic problems in linear regression are considered well, that is case-wise diagnostics and auto-correlated errors, as well as collinear relationship and teteroskedastisity.The equation shows that 9 finance index have important relationship with default ratio, they are ROE, Debt Ratio, Asset Turnover Ratio, Gross Profit Ratio, Scale of Assets, Currency Ratio ([Currency+Marketable Securities]/Current Liability), Debt Structure (Current Liability/ Total Debts), Currency/daily Revenues and Quality of Assets (Accounts Receivable/Total Assets).