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An Empirical Analysis Of The Validity Of The KMV Model To Measure Chinese Listed Company's Credit Risk

Posted on:2012-01-01Degree:MasterType:Thesis
Country:ChinaCandidate:Y J LiuFull Text:PDF
GTID:2219330368978031Subject:Credit Management
Abstract/Summary:PDF Full Text Request
The Basel Bank Supervising and Managing Committee has officially announced "the Third Basel Agreement" in September,2010, which is stricter than "the second Basel Agreement". That means the banking industry in China should to advance with times to implement more accurate model to measure financial risk. Credit risk is an important risk element the Basel Agreement requested the supervision organization to monitor. At present, western developed countries' banking industry has adopted very advanced internal credit risk measure model, which can use current information to appraise the credit condition of an enterprise. By using these models, banks greatly enhanced their risk management ability. As a result of historical and systematical reasons, commercial banks in China still use traditional measurements to weight credit risk, which are far away from the angle of safety. It is significant to learn from modern risk measurement models abroad, study the feasibility of these models in China, and then increase the ability of risk resistance in china commercial banks.This paper uses data, like stock prices and equity value, from Chinese A-share market as inputs to tests the discriminating power of KMV model in China. At the same time, uses Z-score model as a contrast model. The analytical result demonstrates that the KMV model has certain discriminating power, but the power is weaker than Z-score model. By further analyses, it is mainly due to the relatively poor efficient level of Chinese stock market. What's more, the KMV model used in the analyses was without modification, which also limited the performance of the model. Based on the reasons of environment and model, China should take steps to speed up the development of stock market, enhance the credit system, and develop banks'internal risk control system.
Keywords/Search Tags:credit risk, KMV model, validity
PDF Full Text Request
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