Credit Derivatives Products In China's Commercial Banks' Risk Management And Development,

Credit risk is the oldest and most complex risk type in banking institutions. With the innovation of products in banks, credit risk becomes more and more complex. In order to reflect and deal with credit risk well and truly, both the banks themselves and the supervision authorities need more effective credit risk computation and management technologies. As for the commercial banks, credit derivatives are the appropriate new products to meet this need, which are new tools for managing credit risk, mainly including credit default swap, total returns swap, credit linked notes and credit default option etc.This paper is written to introduce this new instrument to China, discuss the environment and conditions in China for the development of credit derivatives, and provide suggestions for it.The paper holds that at present China's commercial banks need credit derivatives eagerly, and there is suitable environment for its development. Although there need more progress to promote the macro and micro conditions, it is feasible to put credit derivatives into practice, and it would be of great significance to improve the credit risk management of China's banks by the use of credit derivatives.Finally, based on the analysis of the reality in China, the paper proposes that we'd better choose credit default swap as the first instrument to put into practice, and discusses the pricing of credit default swap in details. In addition, this paper gives many suggestions for developing credit derivatives. The successful construction of domestic credit derivatives markets depends on the deepening of China's market economy reform and financial reform.