Redefinition of the KMV model’s optimal default point based on genetic algorithms – Evidence from Taiwan》.pdf

Expert Systems with Applications 38 (2011) 10107–10113 Contents lists available at ScienceDirect Expert Systems with Applications journal homepag e: /locate/eswa Redefinition of the KMV model’s optimal default point based on genetic algorithms – Evidence from Taiwan Wo-Chiang Lee ⇑ Department of Banking and Finance, Tamkang University, 151, Yin-Chuan Road, Tamsui, New Taipei City 25137, Taiwan, ROC a r t i c l e i n f o a b s t r a c t Keywords: In this paper, we propose a new method based on genetic algorithms to solve the optimal default point of Credit risk the KMV model. In our empirical study, we compare the GA-KMV model with the QR-KMV and KMV KMV models. The results indicate that the percentage of correctness of the GA-KMV model is higher than those Default probability for the other two models. This is to say, the GA-KMV model has a better goodness of fit. We also obtain Quantile regression the optimal default point for a Taiwan listed company. This can help us to predict the default point and Genetic algorithms improve the bank’s risk management performance. 2011 Elsevier Ltd. All rights reserved. 1. Motivation and introduction the results using both rating agencies and the expected default fault