Credit Risk Evaluations Based On KMV Model

Credit risk,namely default risk,has always been a major concern of banks,other financial institutions and parties involved in financial contract transactions.In this paper,we will study a specific aspect of credit risk: listed company's credit risk(default risk),the key problem is: Extract corporate credit risk related factors from the market risk and quantify it as index,testing its effectiveness in the country.Because the KMV model is mainly based on the stock closing price of listed companies and the liabilities index in financial statements as the main basis for calculation,the market risk and credit risk can be linked with the help of the theoretical framework of KMV model.This paper first introduces the theoretical framework of the KMV model and tests the applicability of the model in China,extracting the indicators of credit risk,then selects two groups of companies with significant credit risk differences to compare the two groups of companies to observe the credit risk,and then improve the theoretical framework of the model.One of the original model assumptions is that the company defaults only on the maturity date of the bond,and that there is no default before T,which is inconsistent with the actual situation.And then use the same data to examine whether the improved model can improve the credit risk of the two groups of companies.At last,we select the data of more than 100 companies in the metal industry and construction industry for nearly 10 years,calculate the credit risk level of the company and observe it how to change with time,and observe whether the indicator is consistent with the real change from the time point of view.