Research Of Default Risk For Listed Company In China Based On State-space Model

Since the U.S. subprime mortgage crisis in2007, the financial turmoil spread globally,and brought great panic and heavy blow to the global financial markets. A large number ofcompanies (especially banks and financial institutions) were downgraded credit-rating oreven bankruptcy as the result of sharp decline in asset quality. Coupled with the recentdowngrade of U.S. Treasury bonds’ credit-rating, and spread of the European sovereigndebt crisis, global financial markets goes worse. The economics of many developedcountries went recession, and the unemployment rate remains high. These events showthat the defects of credit risk measurement model and the rapid development of creditderivatives as well as the lag of credit risk regulatory become one of the main reasons forthis financial turmoil. Although China was less affected by the current financial crisis,However, the asset-liability ratio of some real estate companies are especially high, theexpected cash flow of local government financing platform seems shortage, and manyfirms financing from the underground banks at high cost in the market environment oftight liquidity etc, these signs show that the credit risk is gathering in the Chinese market.Therefore, the improvement of the credit risk measurement models and measures tostrengthen the regulation of credit risk has become the focus of the recent research.Credit risk measurement issue has been a problem in the risk management, credit riskmodel theoretically can be divided into two types, one is the reduced-form model, and theother is structural model. In practical applications, the structural model based on thecapital structure of the company, which has an unparalleled advantage of data acquisitionin assessing the risk of default compared with reduced-form model, and thus is widelyused.To solve the above problem, this paper based on the structured credit risk models,consider the jumping behavior of asset-value under the impact of information and thetrading noise of stock price, building a state-space model to analyze the credit risk oflisted companies. By using of A-share listed companies in Shenzhen Stock Exchange andShanghai Stock Exchange as the datum of empirical analysis, The results show that theasset-value of ST companies jump significantly during the ST period, and compared with non-ST companies, ST companies jump more apparent on the whole. In addition, the stockprices of all listed companies include trading noise, if you do not consider the impact ofthe trading noise, credit risk will be underestimated. But there are also a number of listedcompanies, even though Special treated, credit risk is not increased, on the contrary, somecompanies are not ST, but the credit risk is large. This shows that in the measure of theprobability of default of listed companies, we cannot rely solely on the ST as the judgingcriteria, we should also consider the jump of asset-value and the impact of stock‘s tradingnoise, so as to better distinguish the real risk of listed companies.