The Delta Hedging's Application in Credit Risk Management

摘要

The article measures the bank loan's credit risk with the value of a put option which based on the Merlon structure model, introduces the delta hedging strategy of option transaction into the bank credit risk management. The article analyzes three main influence factors of delta hedging, states that the absolute value of delta has a reverse relation with stock price, the absolute value of delta has a positive relation with volatility, and the absolute value of delta has a positibe relation with maturity date. The article points out that the violation of the traditional transaction and the neglect of the cost are the main defaults of the credit risk's delta hedging, and gives out the solution of the defaults' in practice: setting the proper hedging scale, frequency, and interval according to the bank's operating status.