The Credit Risk Measurement Of Listed Companies Based On The Jump Diffusion KMV Model

Credit is the cornerstone of healthy development of financial markets and creditrisk attracts much attention. Traditional credit risk measurement method relies mainlyon enterprise financial data analysis; the credit risk measurement result is not systematicand comprehensive. KMV model which combines the enterprise’s financial data withthe capital market information can reflect actual credit standing of an enterprise.However the model ignores the asset’s jumping behavior, there exist certain defects.This paper introduces the asset’s jumping behavior to KMV model and builds a jumpdiffusion KMV model.First, this article analyzes related literature and the theoretical basis of credit riskand the asset’s jumping behavior, revealing that KMV model is an advanced credit riskmeasurement tool and the asset’s jumping behavior exists. Compared with othermethods KMV model has superiority, but the model ignores the asset’s jump behavior.Then, on the basis of a detailed introduction of the jump diffusion option pricing model,this paper builds up a jump diffusion KMV model by combining the jump diffusionoption pricing model, Ito lemma with the research of Leland. Finally, the maximumlikelihood method is used to estimate jumping risk parameters to describe the jumpingcharacteristics of stock price. The least squares method is used to calculate defaultdistance parameters to analyze the credit risk of listed companies, and the result wourdbe compared with the KMV model.The research results show that the jumping risk of stock price faced by STCompany is greater than that of non-ST Company. Both individual credit riskmeasurement results and overall credit risk measurement results of the jump diffusionKMV model are better than the KMV model. The jump diffusion KMV model canreduce the probability of the second type of error, and have better resolution towards theST and non-ST companies, but also can more accurately analyze the credit status oflisted companies and its changing trend.