主管:中国科学院
主办:中国优选法统筹法与经济数学研究会
   中国科学院科技战略咨询研究院

Chinese Journal of Management Science ›› 2016, Vol. 24 ›› Issue (1): 1-10.doi: 10.16381/j.cnki.issn1003-207x.2016.01.001

• Articles •     Next Articles

Endogenous Recovery Rate and Credit Risk Measurement

WU Jian-hua1, WANG Xin-jun2, ZHANG Ying1   

  1. 1. School of Mathematical Sciences, University of Jinan, Jinan 250022, China;
    2. School of Economics, Shandong University, Jinan 250100, China
  • Received:2014-02-19 Revised:2014-07-17 Online:2016-01-20 Published:2016-01-28

Abstract: In credit risk models, exogenous recovery rate may neglect the impact on the tail of the loss distribution, and the exogenous specify of the recovery rate leads to the possible model risk. This paper incorporates the factor diffusion process into the structure model of default, derives the inherent relation between the recovery rate and the default probability and analyzes the dependence of expected recovery rate on the expected default probability by using the MC technology. The result shows there are strong negative correlation between expected recovery rates and default probability. Furthermore, the volatility of the asset value has positive compact on the correlation. In the framework of the endogenous recovery rate, the probability distribution of the credit loss is derved, and two index, Credit VaR and ETF, which is the measurement of the credit risk are computed. Finally, the performance of the endogenous recovery rate is tested-based on credit risk model using the market data,which shows that the model can well-character the evolution of the history default probability and recovery rates.

Key words: endogenous recovery rate, factor diffusion process, credit risk measurement, numerical simulation, empirical analysis

CLC Number: