Correlation Study Of Credit Risk And Market Risk Within Chinese Commercial Banks

With the development of the nation’s economy and the loose of the regulation for business of commercial banks, our commercial banks will be more exposed to the market risk. Although the recent financial crisis was focused on foreign states, our economy has been influenced as well. And because of the crisis, we understand the importance of establishing a complete supervision system which can be properly adapted to our financial condition. As a whole, credit risk is always the most important one for commercial bank control, but nowadays credit risk has more and more manifestations and is affected by more and more factors, among which market factors play a key role. This paper first introduces the theory and research method of risk regulation, and then utilizes the data of Chinese commercial banks and market factors to do correlation analysis. According to the result of the empirical analysis, we can offer some guides to the supervision of our banks and promote the development of the banking industry.This paper mainly contains two parts:first, we make a systematic introduction to the risk management of credit risk and illustrate the correlation study of credit risk and market risk. Second, using empirical data, this paper analyzes the correlation between non-performing loan rate and market factors, including interest rate, exchange rate, customer price index and stock index. During the analysis process, we divide the data into two periods and import a dummy variable to distinguish the difference. Then using the result of the model, we can clearly find out the difference of effects from market factors to non-performing loan.