The Study Of Credit Risk Measurement Based On Incomplete Information

In recent years, with the frequent outbreak of the international financial crisis and the deepening of internalization and marketization of Chinese financial system, China has paid more attention to the management of financial risk. Credit risk, as a part of the risk management,has gradually highlighted its importance in the field of the risk measurement. And the academic and industrial circles have also paid more and more attention to it. Therefore, the measurement method of credit risk has become an important research topic.This paper is based on the research of Merton’s structure model. And by applying the geometric brownian motion theory, we mainly study the default probability model which is under an incomplete information hypothesis. Our main research contents are showed as follows:We firstly introduce the endogenous default boundary model. The default boundary is an important part in the default model. On the definition of the default, we consider the case of the first passage model, defining that if company’s assets once below the default boundary it clear up. In the combination of the capital structure, we divide it into three parts including the value of bond, the value of equity and stock’s circulation value.In the measurement of the stock’s circulation, we not only apply but improve Cui Changfeng and Liu Hailong’s method which is based on the Merton model to be fit for the first passage model, and then obtain the formula of value of the stock’s circulation.At last we based on the maximization of the shareholders’ equity derive the endogenous boundary.Secondly we introduce the default probability model which is under an incomplete information. In the hypothesis of the information, we consider the accounting noises,the historical default record and the stocks price. And then using the geometric brownian motion theory, we derive the conditional default probability. Through the numerical experiment we analyze the correlation among the default boundary, bond’s deadline and the default probability. At last, we analyze the effect of the correlation of stock’s price and company assets on the default probability.