Study Of Loan Pricing Of Commercial Bank On The Basis Of Measuring The Credit Risk

Managing credit risk is an important challenge for commercial banks in 21st century, and the essential work of bank credit risk management is to measure credit risk and to price risk. The paper studies the theoretical and practical issues on applying international modern credit risk measure models in China's commercial banks for credit risk management and loan risk pricing, with the aim to provide an excisable loan asset credit risk measurement and credit pricing methods those fix Chinese commercial banks and therefore solve the related theoretical problems.Through the combing and definition of the credit risk measure model related concepts, from the selection of observation period, credit loss measure method, credit loss probability density function, conditional model and unconditional model, portfolio credit risk, default relativity and so on, the paper does comparative analysis on modern credit risk models. In terms of the selection of credit measure index, the paper studies the characteristics of VaR and CvaR, and points out that the traditional measurement for credit risk, i.e. VaR can not reflect the Markowitz portfolio risk diversification effect in a lot of situations and do not satisfy the subadditivity, while CaR as the new development of risk measurement field is the right risk measurement processing the above characteristics.The commercial banks'loan credit risk measurement and risk pricing include two levels, i.e. transaction level and product level. From the perspective of transaction and according to the core definition and principles of five-grade loan and new Basel Accord definition of default, the paper suggests that banks can use loan transition matrix to calculate the default probability of each grade, accordingly, the loan's five grades can reflect the default probability, therefore the problem of unsatisfied data of default probability at current stage can be solved. Besides, based on China's credit culture and judicature environment, the paper builds a comprehensive default loss rate model on mortgage pool that practically solves the default loss rate calculation problem. The default loss rate model and five-grade default probability system built accordingly and the empirical analysis on a commercial bank's credit risk measurement under IRB model framework indicate that the capital requirement calculated with the modified method proposed by this paper is less than that according to Measures for the Management of Capital Adequacy Ratios of Commercial Banks promulgated and implemented by China Banking Regulatory Commission.As to calculating the economic capital cost of loan transaction, before the implement of new Basel Accord internal rating-based approach, general reserve is included in Tier 2 capital, credit risk contained equity consists of expected loss and unexpected loss. Through the study of economic capital measure model, this paper believes that adopting new capital accord CP3 version to calculate loan's capital consume is more proper for shareholders'sake. Regarding to calculate capital cost, fund transfer pricing method can be used to separate interest risk that is difficult to analyze and manage from loan business and transfer it to other specific department to manage.With theoretical and empirical study on loan transaction risk pricing, the paper finds out that due to different operation cost and funding cost, the loan risk pricing covered capital cost in credit market shows a"seesaw effect", that is to say, those banks with low operation cost have the price advantage regarding to debtors with high credit rating. On the contrary, those banks with high operation cost have the advantage as to debtors with low credit rating. On the basis of loan transaction risk pricing theory, the paper proposes the concept of bank credit frontier, with the mutual constrains of specified loan cost, loan interest, credit rating, default loss rate, loan period and other conditions, bank credit frontier is built. With empirical study, it describes the frontier shape on three-dimension surface with interest contour line.Regarding to the product level, the paper studies the aggregation credit risk of commercial banks'retail loan and systematically build eigenfunction-based aggregation credit risk model, solving the drawback that traditional CreditRisk+ model under default probability changing condition can not provide analytic expression. Based on adopting eigenfunction-based aggregation credit risk model, with VaR and CvaR, the paper does risk pricing empirical study on one product of commercial bank's retail loans and the test shows that if economic capital keeps unchanged, the confidence levelτof CVaR is less than the confidence levelαof VaR, the relationship ofτ=2α-1 is the conservative estimate of their relationship.