Research On Systematic Risk Measurement Of China’s Commercial Banks Based On CCA Model

Since November 2006,China’s financial system opened to the world completely,also China’s financial industry began to enter the economic environment which include both opportunity and risk.Of course,as the mainstay of the financial industry,commercial banks face a new challenge.Also,the outbreak of subprime crisis in United States made the world into the financial crisis,which further increased the difficulty of competition with others for China’s commercial banks.Because of the subprime crisis,much areas had been in crisis,so many scholars began to pay more attention to the study of systemic risk.This paper is aiming at the measurement of systemic risk,and hope that the readers can understand the systemic risk deeper through the article.Then this paper also do some quantitative analyzes which can be used to provide some ideas and Suggestions of countercyclical supervises for commercial banks.This paper mainly uses the CCA model to study all the listed banks before 2010 which as a whole unit,and get the risk index such as default probability and default distance.Then use these indexes to explore the development of systemic risk of China’s commercial banks between the first quarter of 2007 to the first quarter of 2016.Finally combined with the measurement research provide some recommendations to China’s commercial banks to prevent systemic risk.Through the quantitative research of this paper,we can get the level of the risk which can be resisted.If the probability of default is 0.03,it means that there is a big economic crisis,which will produce systemic risk.For our commercial banks,The probability of systematic risk should be controlled within 0.01.the expected net present value reflects the risk loss that the commercial bank can expect.Through this analysis,it is clear that the commercial bank always increase the value after the risk,contrary to the counter-cyclical supervision.Now,China adopted a series of measures to help stable economic development,which alleviate the systemic risk faced by China’s commercial banks.In this paper,The innovation lies in : I mainly use Contingent claims analysis(CCA)to analysis the main part of the research.All the commercial banks which came into the market before 2010 are included into the bank organization.Because these banks’ turnover accounted for more than 90% of the total Chinese commercial banks,so these banks can represent the level of Chinese commercial bank system.Second,the equity market value of these banks can be got more accurately than the banks which are not listed companies.This can increase the reliability of the data.The known variables in this paper are: equity market value and its volatility,book value of debt,rate of interest.When calculating the value of the equity market,this paper creatively use Wind bank index of price-to-book value to calculate the equity market.The specific algorithm is given in the article.This paper extract the data between the first quarter of 2007 to the first quarter of 2016.Because a lot of big events had happened during this time,so it is necessary to select the period.Through taking example by the calculation model of KMV model,this paper use MATLAB R2012 a to calculate the unknown variables.Finally,we get the result which can be used to measure risk.Through processing the data,we can analysis the systemic risk which during 2007 to the first quarter of 2016 very intuitively.At last,this paper give some suggestions to keep away from systemic risk.