The Measurement Of The Listed Companies’ Credit Risk Based On The KMV Model Under Market Segmentation And Stochastic Interest Rate

Credit risk is one of the oldest and most important risks in the financial market, itis also the major risk faced by the financial institutions. In2007, the subprimemortgage financial crisis in America caused serious damage to the economy andsociety, which also bring new challenges for credit risk management in the wholeword. Currently, in the worldwide, to establish a credit risk measurement model withstrong practical significance, and use it effectively in the management process inreality, has become an widespread and urgent task.Based on these realities, this article selected a famous credit risk measurementmodel——KMV model. Firstly, this paper introduces the definition, the main featuresand the measurable indicators of the corporate credit risk. Secondly, this paperdescribes the evolution of corporate credit risk measurement methods, which focuseson the basic idea of the KMV model, as well as its application framework andevaluation. On these bases, the model takes the market segmentation and stochasticinterest rate factors into consideration and build a new KMV model, which can makea comprehensive and accurate measure for the listed companies in the complexenvironments. Finally, the article choose20A+H listed companies which are in anenvironment with both market segmentation and stochastic interest rate, and thenmake an empirical analysis about their distance to default(DD) to verify the validityof the new model, the results show that under the same condition of marketsegmentation, the new KMV model with stochastic interest rate is fitter for themeasure of companies’ credit risk than that one with fixed interest rate, especially thecompanies belong to the interest rate sensitive industries.The article considers both the stochastic interest rate and the marketsegmentation’s impacts on the A+H listed companies. Through the measurement forthe companies’ distance to default(DD) and comparative analysis, the article enhancesthe understanding of the A+H listed companies’ overall credit risk, and providesvaluable reference for the investors and regulators.