Applications Of Modern Credit Risk Management Models In Our Country's Commercial Banks

Credit risk is one of the major risks commercial banks face. In China, the issue of credit risk is even more serious. How to improve credit risk management has become the most urgent issue facing commercial banks. China's commercial banks lack the ability to manage credit risk quantitatively, and they seldom use models in dealing with credit risk. This paper endeavor to study credit risk management in our commercial banks from the perspective of quantitative analysis, and analyze the applicability of various types of credit risk models in China .This paper also investigates the credit risk profile of some listed companies in our country on the basis of the KMV model. Finally, put forward several proposals on how to enhance commercial banks' credit risk management ability.The paper consists of five sections:The first part is introduction. Explained the background and significance of the topic, what work has been done about it and the main content of this paper. The second part analyzed some famous modern credit risk management models including the CreditMetrics model, the CreditRisk+ model, the CreditPortfolio View model and the KMV model. The third part inspected the current situation of credit risk management in our commercial banks, and analyzed the applicability of modern credit risk management models in China. The major conclusion of this part is that the KMV model is the most suitable model that can be used in China. The fourth part did some empirical work about some listed companies based on the KMV model, and find out that the distance to default and the expected default frequency are two proper indexes to measure credit risk. The fifth part put forward some proposals from the aspects of improving institutions, completing the database, internal as well as external credit rating, and developing models on how to raise the level of credit risk management in our commercial banks.