Application Of VaR Method In Credit Risk Management Of Commercial Banks

Credit risk is one of the main risks commercial banks are faced up with worldwide.Especially in the risk structure of Chinese banks, it occupies the first position. To takecharge of credit risks more scientifically, we need to apply more quantitative analysis inour country, as an addition to the current method focusing on qualitative analysis.VaR is the main method of quantifying risks currently, with characters ofscientificalness, practicability and accrucy. The CreditMetrics model, published byJ.P.Morgan, is the specific application of VaR method in the field of credit risk, and hasadvantages in quantifying credit risks of bonds or loans. This thesis expounds the basicidea of VaR method, and introduces the specific application for credit risk. By studyingCreditMetrics, this thesis demonstrates the hypothesis and framework of this model,explains the process and keypoints of calculation by a living example. Moreover, in orderto provide a possible solution for Chinese banks to promote quantifying credit risks, thisresearch has a deep investigation on realistic basis and outlook of CreditMetrics in China.