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Correlated Default Risk Measurement of cross-shareholdings of listed companies

Author: ChenZuoJun
Tutor: ZhangGenMing
School: Central South University
Course: Management Science and Engineering
Keywords: correlated defaults default risk copula Cross-holding
CLC: F224
Type: Master's thesis
Year: 2006
Downloads: 261
Quote: 1
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Abstract


People begin gradually pay more attention to the credit of companies,when they see the accounting scandal at Enron, the world-classcorporation. In this situation, the measurement of default risk becomesvery important. At present, the research for the modern default risk modelis at the moment of the beginning in China and Many domestic scholarswho is questing for it. With the developing of the economy, the relationamong the corporations deepens ceaselessly and the effect to each otherincreases a lot. Ignoring thinking the infection of other corporations, thedefault risk measurement to a single company exists limitation obviously,which we need reconsider and build a model being fit for the practice ofChina.This paper first does the summary for the correlated default and defaultrisk models amply. It compares the traditional measurement for thedefault dependency with the one using copula, and points out thedeficiency of the conventional method and the advantage of the copulamethod. It also draws the comparison of the default risk models withoutconsidering the correlated default and indicates the strongpoint of themixed form model, and note the disadvantage of the model ignoring thedefault dependency. According the fact of internal stock market, the paperunites the mixed form model of default risk measurement with Frankcopula. Applying the improved model to listed cross-holding companies,this paper compares the default risk measurement without consideringdefault dependency with the one considering, and analyses the effect tothe measurement for the change of the correlation default.At last, this paper uses matlab6.5 to compute and draws conclusions:the mixed form model, the one of default risk measurement withcorrelation default using copula, is more corresponding with the defaultrisk condition of corporations and respond default events more swift thanthat of the model without correlation default. Beyond a certain term, thedefault risk and the speed of becoming default increase with the augmentof default dependency, when there is positive default dependency; thedefault risk and the speed of becoming default decrease with the augment of default dependency, when there is negative default dependency. Thedefault risk with positive default dependency is greater than the one withnegative, whose speed of becoming default is swifter. Within a term, theresult is opposite. I wish the discussion of this paper could be useful forreference to the measurement of default risk.

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CLC: > Economic > Economic planning and management > Economic calculation, economic and mathematical methods > Economic and mathematical methods
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