Credit Risk Pricing Of Commercial Bank Based On KMV Model

Credit risk is one of the most important risks of financial institution. Comparing with other risks, credit risk has its own special characteristics, that is, non-normal distribution, non-systematic risk and it is very hard to acquire data, which decide that credit risk measuring is one of the vital subjects for commercial banks and other financial institutions. In our country, the technology of credit risk measuring still keeps qualitative analysis stage, that is, the debt-to-asset management and financial ratio analysis. At present, internationally, the commercial bank development direction is gradually transferring the qualitative management method is mainly decided by subjectiveness into quantitative management method, among them, it's the most famous for KMV model that is researched and developed by KMV company in the U.S.A. The model is based on option pricing theory, and measures listed company's credit risk through company asset market value, its fluctuation, and share equity value and its fluctuation and other parameters. The model is very popular with many countries and areas for its accuracy and effectiveness to measure credit risk.Because the economic condition of Chinese listed company is greatly different from western countries, so there may be some limits to the KMV model's application in our country: before 2005, the security market in China is involved in the Decouple Share Structure, it results in the differences between price and share. Nowadays, the Decouple Share Structure Reform has been over, but there are still some shares cannot be traded temporarily. Combining the fact of our country, this article adjusts some parameters of the KMV model, at the same time, differentiates Empirical EDF and Theoretical EDF, and tests KMV model's measuring effect for our listed companies through the positive study.