The Research on Distress Warning for Chinese Listed Commercial Banks_ An OptionBased Approach.pdfVIP

The Research on Distress Warning for Chinese Listed Commercial Banks: An Option-based Approach Sun Xiufeng, Sun Boyang, Chi Guotai School of Management Dalian University of Technology,DLUT Dalian, China Xiufengs@dlut.edu.cn Abstract—Using an option-based approach, this paper constructs of most practitioners in the banking industry, among which a distress warning model for Chinese commercial banks and Moody’s KMV received more attention and development. analyzes the distress situations of China’s 14 listed commercial Many studies have proven the validity of the KMV model, banks with the samples in 2008. According to the empirical such as the paper of M Kurbat and I Korablev (2002) [1]. In results, we obtain two valuable conclusions that the option-based essence, KMV model is a credit risk model based on the option approach is valid in distress warning of Chinese banking and the pricing theory. Unfortunately, the internal parameter setting distance-to-distress is more sensitive to the interest rate than to method and calculation principle of KMV model are always the distress barrier. The study results also show that China’s 14 kept secret. That is why so many researchers use option pricing listed commercial banks all appear to be safe because of their theory to analyze and study the specific method implied in the positive values of distance-to-distress and the