Probability Of Default Model In China's Bank Credit Risk Management Analysis

With the improvement of market degree of Chinese economy operation, thecredit risk resulted from dim consciousness and low-level management of commercialbanks has become the important factor that impedes the healthy development offinance industry. Confronted with the request of domestic condition and new BaselAccord, commercial banks must establish a dynamic credit risk management systemto strengthen their competences.With the example of Logistic model, the paper makes a special research on theproblem of default probability, and then makes a comparative analysis among severaldefault probability models. The introduction section summarizes and reviews thecurrent condition about the research on credit risk measurement and introduces thestructure and innovation of the paper. In the second chapter, we make a further studyon credit risk management from the point of default probability, including its basicprinciple, meaning and calculating methods, and educe some conclusions. In the thirdchapter, we study on the application of Logistic model in our country. Besides, wesummary the problem to be solved in the application of this model in China's financialmarket. In order to develop China's credit risk management level, in last chapter, wepresent some proposals for commercial banks.Through the analysis in the third chapter, it proves that Logistic model can be aproper way to measure the default probability of a company. A smaller numericalvalue means better credit condition. Besides, we find the reasons why there exist somediscrepancies between result and fact and make some adjustment proposals.To conclude this paper, we point out that in order to improve China's credit riskmanagement level and offer reliable credit condition information for all the investors,we have to develop our own credit risk model complied with the situation of China'sfinancial market, and to adopt quantitative analysis together with qualitative analysis.