Research On The Infestation Effect Of Credit Risk Based On Default Dependence

In recent years, a succession of financial crisis has been greatly impacting on the global economy. During the crisis, there is often a phenomenon of default or bankruptcy of a company defaults caused by the occurrence of associated companies, which have been formed contagion effect. With growing financial market openness and linkages, the default dependence which caused by common event of default and contagion between firms is also gradually enhanced. In the meantime, the default dependence between common event of default and contagion effect also gradually increased, which result in the loss of the bank’s huge credit assets and bring a great challenge to the bank credit risk management. Therefore, the default contagion for credit risk management theory has great theoretical and practical significance.In view of this, this topic focus on the dependent default measurement and infectious risk two issues, follow the principles of credit risk quantification theory and default dependency on the basis of system analysis, establish a comprehensive consideration cycle and infection of default two related structure model of the interaction strength of default contagion.This article focuses on the parameters estimation which in the default intensity model. Under the principle of maintaining good compatibility with modern credit risk management model, we use KMV model to calculate the historical average default probability and volatility, probability of default conditions, the simultaneous transmission of default intensity model of nonlinear equations. And the local search method is used to search the local optimal solution, and thus to estimate of default contagion model parameters, and to estimate the results of analysis and the size of the default contagion effects.