Credit Risk Measurement And Management In Commercial Bank

In the narrow sense, credit risk in commercial bank refers to default risk,that is, the loss possibility caused by the situation that debtors or obligors are unable or unwilling to shoulder the responsibility of repaying the debt;in a broad sense credit risk also includes the declining possibility of economic value and market value of capital due to the decline of debtors credit rate and the expanse of debtors credit spread. The quality and reclaiming capability of credit assets has a direct influence on the regular operation and existing competence of commercial bank, therefore it is a key for credit risk management in commercial bank to effectively measure and manage credit risk, improve credit quality and especially control non-performance loans.At the start, credit risk theory study mainly focuses on the pricing of different kinds of credit risk assets. In the early time Altman commenced to make the quantitative research on credit risk and his famous Z-score is a statistical predict model based on the analysis of bank historical debt cases in virtue of Discriminant Analysis of Statistics. This model has been applied widely all over the world and becomes a significant milestone in credit risk quantitative research. It is Merton who initiated the new method for credit risk quantitative research—risk debt pricing structural Merton model in 1974 in virtue of Black & Scholes'Option pricing model. In Merton model,debt default risk or credit risk depends on the discrepancy between market value and debt value, while debt value is mainly decided by three factors—risk-free bond return, probability of default and debt instrument items. Merton's study contributes greatly to the future credit risk quantitative research and numerous influential credit risk models are based on Merton's study. Chapter two of this paper makes a systematic and all-around introduction and comparison of the...