Based On The Credit Risk Stock Yields Simple Model

Credit risk means the risk that a counterparty is unable to fulfill the agreed obligations in the contract resulting in financial loss. It consists of default risk and credit spread risk. Structural model mainly uses option pricing method to estimate the default risk of fixed income instruments. reduced-form model sees credit spreads as part of the risk-free interest rate term structure. In this paper, on the basis of the research on a simple model of traditional credit risk, considering the missing of breach data, we study the pricing formula of the defaultable stripped securities based on the yield of the shares of listed companies, respectively, we made empirical analysis of the market interest rate and default intensity.First, the article explains the use of the par value of the recovery is more reasonable for the pricing of defaultable stripped securities.Secondly, in order to overcome the puzzle of missing data, this paper analyzes the company’s assets constitute. We believe that the default intensity of listed companies are related with their stock returns and the stock market yields. This article gives the default intensity expression based on stock returns and market returns.Finally, we assume that market interest rates meet the CIR model. Through the empirical analysis, we found it is more reasonable to use the CIR-GARCH (1,1) model to fit market data. While in the empirical study of the credit risk component in the pricing formula of the defaultable stripped securities, we randomly selected sixteen representative listed companies of a credit rating agencies. Then we use the default intensity given in this paper to calculate the corresponding default intensity. We adopt the default intensity as index of credit risk to sort. We compare the results with the results of rating agencies. We found that the default intensity of this article can be used as an important basis of a listed company’s credit rating. Then we can adopt it to determine the credit rating of listed companies.