The Loan Pricing Of China Commercial Bank Based On RAROC Method

The commercial bank loan pricing based on RAROC is a comprehensive risk pricingmethod. Its goal is to match loan price and risksafely and profitably. It treats differentdegrees of risk of loan customers in different way, so the bank loan customers optimize andbear the risk of rationalization can be protected. This paper mainly discusses theeconometric analysis of each index of RAROC pricing formula and improves pricingformula.At first, the paper introduces five kinds of mature methods of loan pricing, thencompares and analysis these methods. Combining with the actual situation of theCommercial Bank of our country, the author finally selected RAROC pricing method. Thenthe paper analysis and computes the indexes of RAROC pricing formula by focusing on themeasurement of expected loss and unexpected loss. The probability of default and lossgiven default from expected loss are respectively researched by using the primary methodof Basel agreement and advanced method, in which, combined with China’s actual situation,KMV model analysis the probability of default and multi factor model analysis the lossgiven default. In Credit Metrics model, the loan interest rate as unknowns and the economiccapital of econometric model is the function of the interest rates on loans, the economiccapital into the RAROC pricing formula can get the loan interest rate.However, RAROC pricing model does not consider the economic capital foroperational risk. In this paper, the author selects standard improved method to introduce themeasurement of operational risk in detail, including the basic indicator approach,standardized approach and advanced measurement approach by combining the actualsituations of China’s commercial banks. Moreover, the economic capital is the funds forcompensate of the possible loss and most can only invest the safety and liquidity ofgovernment bonds, therefore, to adjust the economic income of capital, the paper analyzesthe suitable economic capital investment rate of return and amends the pricing formula.Finally, the paper dynamically adjusts of general customers return in the model andintroduces three methods of measuring customer contribution: internal funds transferpricing method, practical price method and realize the benefit funds presumption calculating method.Improved RAROC pricing model considers the operational risk economic capital,economic capital gains to do further analysis and discussion, in line with the Basel accord,more embodies the relationship between risk and return. According to the generalcustomers return for lending rates, the author makes the adjustment of the close relationsbetween banks and enterprises. This is China’s commercial banks to enhance pricing powerand competitiveness and has especially positive significance to reduce financing costs fordomestic enterprises...