A Study Of Calculate The Probability Of Prepayment By The Credit Risk Model

With the development of Chinese economy, more and more enterprises operate with a high debt ratio. The demands of the entity economy for the investment and financing are also increasing. As the core of the capital markets, commercial banks are in a rare period of development. However, China’s authorities are tightening the monetary policy for monetary market, the financing demands of the enterprise continue to maintain heat with a high interest rate, and the prepayment pressure of the loan has revealed beyond doubt, the prepayment phenomenon is more and more widespread.The prepayment brings a lot of risk to the commercial banks, or will give severity losses for the bank in daily operations. For now, much more researches stands in the angle of the lender or limited to the personal loans and state mortgages in domestic academic circles. Few scholars corporate business loan as the research object, What’s important, commercial bank in China give insufficient attention on the management of the prepayment risk. If commercial banks could predict the probability of loan prepayment accurately, it will greatly reduce the possible loss by the prepayment for the commercial banks.Prepayment risk as one of the interest rate risk, which behaviors is similar with the default risk. This paper proposes a view that is to calculation the probability of prepayment by using the credit risk models. This article summarizes and analysis research methods from domestic and international scholars, compares advantages and defects of several credit risk models systematically, and introduce to survival analysis theories and models specific, by empirical analysis which consider with requirements of survival analysis and characteristics of prepayment, in order to demonstrated the feasibility and reliability by using survival analysis to construction loan prepayment probability model for commercial banks, to provides an effective theoretical support and technical reference for the prepayment risk management.This article from the perspective of commercial bank, analyzes the risk and hazard of the prepayment, aims to provide an effective method to estimates the probability of the prepayment for the banks. According to this ideas, the frame is as follows:The first chapter is the introduction. From a situation as a whole, introduces the overall idea of this article, and the background of the prepayment risk of the commercial banks and related research, includes the background and significance of this paper, literature review. The situation analysis in the development of the research in the phenomenon by prepayment and default risk, research methods and contents and innovations of this article is also related.The second chapter briefly describes the relevant concepts of liquidity loans, and defines the prepayment risk, demonstrates the default probability model applies to the prepayment model. Based on this thought, Summary the domestic and foreign methods and research status of credit risk assessment. This episode introduces the public loans and the loan prepayment risk. Reviews about the research condition of prepayment models and credit risk models. Compare the advantages and disadvantages of several major credit risk models.The chapter three reviews the basic theory and models of the survival analysis first, including the nonparametric model, semi-parametric model, and parametric model. Second, introduces coefficient test method of Cox model and process of application. Consider with the characteristics of survival analysis model, analysis the feasibility of using survival analysis method to calculate the probability of the prepayment.The fourth chapter proposed the selection method of factors which to build prepayment survival model, and then listed the assumptions. Factors determination includes the selection range method and evaluation. The selection part analyzes all kinds of influence to the probability from internal and external respect. The assumption part is focusing on the requirement for apply the Cox proportional hazard function to build prepayment survival models. This model considering the nonlinear relations between variables and remarkable to the result when calculation the probability of loan prepayment, which results will be more reliable and practical. In the estimation of the parameters, we also consider the loan would default or repayment, which enhance the applicability and the objective reality.Chapter5is empirical examination, which analyses the data of one-year short-term current capital loan at a joint-stock commercial bank in China. Cox proportional hazard model is able to reflect the correlation of variant and prepayment probability. The result indicates that the first prepayment of the one year short-term current capital loan occurred at the fourth month, while the prepayment probability peaks at the ninth and the tenth month. An essential factor influencing prepayment probability is whether Acid-test Ratio, Return on Equity and Prepayment necessitate breach penalty.Chapter6is the conclusion and suggestion.