Commercial Bank Credit Risk Measurement And Economic Capital Allocation

Commercial banks are operational risk of financial institutions. their fundamental means of profit is operating risk in order to achieve the goal of maximizing risk-adjusted returns.whether to properly control and manage risk determines the success or failure of commercial banks. Since joined into the WTO, foreign banks is squeezing into the Chinese market, and they are working with China's commercial banks to carry out comprehensive competition by virtue of the strong economic strength,scientific management methods, advanced risk measurement and control methods and marketing tools.At present, China's financial market has started relatively late, Compared to developed countries,credit risk management is relatively late on the commercial banks.The research of China's credit risk measurement model for the main stay is in a qualitative analysis phase, and the study focused not strongly. construction and precise measurements of model is rarely involed in study.Introduction of foreign risk measurement model and the research of Development Trend is more while the risk measurement model that is suited to China's commercial banks is relatively concernd.Learning from foreign banks in the advanced management concepts, and gradually establishing a risk-quantified as the core of the risk management system,which is an inevitable choice of China's commercial banks in the development .Because credit risk is the biggest risk which China's banking industry is facing.The excessive concentration of credit risk is serious threating to the bank's survival, development and security of the entire financial system. Therefore,the research of China's commercial banks to measure credit risk and economic capital allocation has a certain theoretical and practical significance.Firstly this article systematically expounded and analysis credit risk measurement of commercial bank's and methods and theories of economic capital management. secondly we selected KMV management model to study commercial bank's credit risk measurement with the selected sample data of the credit risk measurement. the KMV model is based on the state of an abroad market, whlie China is in the formative stages of a market economy. so the foreign markets are different from China,Taking into these difference, this article has adjusted the credit risk measurement of relevant parameters in the use of KMV model of China's commercial banks, and use Excel, Matlab and other software to empiricaly analys this sample data.Frequency model parameters data have been calculated such as the company's equity market value , equity value, volatility, the company asset value asset volatility of non-compliance identified points, and default distance, expected default,At the same time,based on the expected default frequency date,this article made some recommendations of commercial bank's economic capital allocation This will not only be able to strengthen credit risk management, specifically China's commercial banks have a strong business management practices targeted, but also provide a useful reference and practical guiding significance for China's commercial banks.