Reseaching On Using Of Credit Derivatives Of Our Country

Commercial Banks have been facing the credit risk, liquidity risk, market risk, operation risk and legal risk. Among them credit risk is the most basic, oldest and harmful risk in the financial markets.Modern credit risk not only exists in loans, bonds, and other traditional credit tools, but also exists in the off-balance-sheet activities, such as loan commitment and guarantee. Credit risk is becoming more and more complicated and diversified. Credit risk is defined during the financial products transactions, if counterparty default or credit rating decreased, they will causes loss, credit risk includes counterparty defaults directly and the change of the probability of the counterparty honoring the agreement. Credit risk has the distinctive characteristics, compared with other financial risks. Credit risk management is very important to the survival of the banks, risk management method development have experienced three stagesIn the 1990s credit derivatives appeared, which is a new credit risk management tool, and the modern commercial bank credit risk management technology's development trend, it can make the credit risk management methods become energetic, initiative .The credit derivatives is good for the quality of loan assets of commercial bank, can enhance the Banks' competitiveness, which is beneficial to the bank development. In present, our country is still in groping stage commercial at the aspect of using credit derivatives to manage credit risk. Building China's credit derivatives markets is vital.Firstly, this paper analyzes the situation of the credit risk management of commercial Banks in China, our country'commercial bank is still facing the challenging of credit risk. Our country commercial bank credit risk management level and the developed countries in the world have great gap. Although the ways are numerous, many means is afterwards a solution, is not a advancing management methods. The credit risk can not been real controlled. Chinese commercial Banks want to go into the abroad, it's necessary to using the most advanced international credit risk management method, credit derivatives is a financial innovation tools, using and introducing credit derivatives are significant.Next, this paper analyzed the credit derivatives and the hedge mechanism. Credit derivatives first appeared in 1993, and then developed rapidly. Credit derivatives are used to separate and transfer credit risk of various techniques and tools collectively. There are four most common credit derivatives; they are CDS, TRS, CSO and CLN. All of them are good for loan asset of commercial banks.After analysis of the hedge mechanism, research the relationship between the credit derivatives and quality of the credit assets rely on the time series data of the JP Morgan, and resolute shows the relationship is evident between the volume of trade of credit derivatives and NPL rate, increasing the rate of the volume of the credit derivatives will reduce the NPL rate.Developing the credit derivatives should be gradual, according to our country's current financial development level, the type should simplest, the technical structures are most mature, and the type is credit default swap. The trader should be introduced step by step. In pricing strategy choice, in the initial stage, should choose a simpler, methods can be maser, foreign exchange (FX) analogy pricing model should be first selection.The appearing of the credit derivatives supplies a bright way to credit risk management of commercial Banks in China. But our country need to many work in order to make full use of credit derivatives .Therefore, our country should actively create conditions to our credit derivatives market development and lay a solid foundation.