A Research on the Predictability of Credit Risk of the Chinese Listed Companies Based on the KMV Model

摘要

This paper improved the KMV model by using the GARCH model to estimate the volatility of the equity value, using iterative process to estimate the asset value and its volatility. The improved model modified the method in the valuation of non-tradable shares. The paper evaluates the credit risk of 30 companies listed in Shanghai and Shenzhen stock markets, concluding that the KMV model modified can not only identify the difference of credit risk between ST companies and normal companies well, but also indicate the change tendency of listed companies' credit quality correctly. The modified KMV model is able to recognize the deterioration of the credit quality one year ahead at least.