Credit Alert Model And The Dynamic Effect Of Corrected Pricing Of Credit Default Swap

This paper aims to study the establishment of credit alert models using theinformation of companies. Due to the slow change of the company’s credit ratingcannot reflect the changes of company’s credit risk, this paper established credit alertmodels for monitoring companies’ credit risks. The main contents are two parts asfollow.Firstly, I used companies’ credit rating, information of area, industry and real-timeCDS prices to classify and to discuss. Through the normality assumption and test, Icreated three indicators: benchmark index, sector index and Beta index. The threeindicators are what we can use as the company’s new credit risk indicators.The second part is the extension of the first part. We develop the prices fordynamic correction. In this paper, we use a dynamic pricing formula in the frameworkof CDS credit default intensity process with interest rate factors driven by diffusionprocess to get the analytical solution of CDS pricing. And then to predict the trend ofthe company’s credit risk through the forecast of CDS prices.