Research On The Application Of The CDS In Commercial Banks' Credit Risks Management

Credit risk is one of the most important kinds of the risks that the commercial banks are facing in operating management. Foreign commercial banks not only use traditional methods to manage the credit risks but also use credit derivatives to hedge and transfer their credit risks. Credit Default Swap, as a standardized contract, is the foundation of credit derivatives market, and play an important role in Foreign commercial banks' risk management. Commercial banks are the core of the financial market of China, which gather the most credit risks. There are 71.9 trillion loans but 59.21 billion nonperforming loans in 2013, the NPL ratio nearly reach 1%.At Present, the technique that hold to maturity cannot keep up with the development of the financial freedom, internalization and unification. It's imminent to create a new tool to manage the credit risks. Credit Default Swap which proved to be an effective method of credit risk management in practice and in theory will be the inevitable choice of the financial market.This dissertation mainly talks about the CDS' widely used in commercial banks' credit risk management in China.It introduces the development of the CDS, explores its rationale and mechanism of risk aversion. combining the current situation of the commercial banks' risk management with China's macroeconomic trends and policy guidance, this dissertation analyzes the relationship between China's commercial banks' non-performing loan ratio and macroeconomic factors by modeling. Besides, it analyzes the effect on liquidity and security about applying the CDS to the banks' credit risk management and give some suggestions to the application of the CDS.Research on the application of the CDS in commercial banks' credit risks management is conducive to the improvement of China's banking risk management. It also has an important significance that the commercial banks participate in international competition, optimize the allocation of resources and active market economy of our country.