Applicability Research Of Credit Risk For Chinese Listed Companies Based On KMV Model

The main object of this paper is credit risk for Chinese listed companies based on KMV model. There're many risks for Chinese listed companies as liquidity risk,law risk,operating risk and so on. During these risks, credit risk is the most important one.In developed countries, how to measure credit risk is the most popular question. There are four main models used to measure credit risk in west countries, credit metric model,Macro-simulation model,credit risk+model and KMV model. After carefully comparison, we found that KMV model is more suitable for Chinese listed companies in theory. So this paper spend most of word to authenticate whether KMV model is suitable for Chinese listed companies or not.In theory, KMV model based on MM theory,Black—Sholes and Merton option pricing theory which is very authority around the world. And, the data needed for KMV model is easy to get in China and it is not difficult to calculated, KMV model seem to be applicable for Chinese listed companies.Based on the analysis above we made an empirical research which collected 20 listed companies to be the sample to authenticate the accuracy of KMV model in China. The result of the empiricist is not as well as we thought. The result says KMV model can not accurately the credit risk of the sample listed companies.The reason for this bad result is five:first, we can't calculate the accuracy date of the equity value of the listed companies because of the un-circulation of Chinese list companies. Second, the distribution of asset value of the listed companies is not normal distribution; Third, we can't make sure the market risk-free rate of return of China; Fourth, we can not select the fixed default point; Fifth:the un-effectiveness of Chinese stock market.However, for improve the applicability of KMV model, this paper chose three method, listed as: First, combine another model to make a new credit risk model to use;Second, improve the accuracy of KMV model with the help of other mathematical model;Third, change the default point of KMV model.With these methods we can improve KMV model's applicability in China. In addition, this paper suggest some ways to enhance management of China for measure and manage the credit risk for listed companies. As built a large credit risk-based database,perfect our stock market,training more talents to manage credit ris,and establish a professional credit risk management department.