In the recent years, the banks pay more attention to the importance of the Credit Risk. Thus, more research institutions start to focus on the problem of the Credit Risk. And the KMV company is one of the most famous institutions. The paper uses Expected Default Frequency Model developed by KMV to value the expected default probability of Taiwan listed company, and compared two ways, Financial Statement Analysis and KMV Option Model, to value EDF, and try to understand the distribution of the EDF of Taiwan listed company.

"Cross-Border Contagion in the Banking Sector: The Case of Nordic Countries" by Lina Baronaite Abstract: The objective of the thesis is to estimate the degree of cross-border contagion among the Nordic banking sectors. It analyzes a sample of sixteen largest listed Nordic banks from January 2004 to January 2014. Using a multinomial logit model we test whether there is any degree of contagion among the four banking sectors, whether it is more pro- nounced for larger banks and whether the recent financial crisis has exacerbated it. Our results are in line with similar studies conducted for other countries. In particular, we find that a shock in one bank- ing sector is positively associated with an increase in shocks in another banking sector. Second, these shocks are larger and more significant for larger and more active international banks. Finally, the effect of the recent financial crisis has ambiguous effects on the cross-sectoral banking contagion. It appears that contagious links between some sec- tors weakened (Sweden and Denmark, Sweden and Finland). Other economies (Sweden and Norway) on the contrary became more depen- dent on each other. The results are robust to a wide variety of changes in specifications.

Abstract Ever since 1980, facing the impact of the more freedom of trading market and the fast developing on the new technology, financial market grows rapidly in prosperity. Especially the derivative financial goods are brought to the market, the financial organization¡¦s affairs and trading styles become more diversified, also added new risks of uncertainty. Furthermore, more complicated credit risk patterns caused the traditional measuring tools of financial risk among market participants, even risk structure and credit culture being severely challenged. During 1990, financial crisis or fraud cases consecutively happened in the international financial market, so the financial risk management has become a subject concerned by financial organizations, government and the public investors. However, credit risk is always the focus in all the financial risks. Especially the Basel Committee on Banking Supervision, (a branch of the Bank for International Settlements, BIS), published ¡§The New Basel Capital Accord¡¨ (Basel II). In this New Basel Capital Accord, it not only emphasizes the importance of credit risk, but also allows financial organizations to develop Internal Rating Based Approach, ¡§IRB¡¨ to evaluate and calculate proper risk capital. These operations for credit risk evaluation model¡¦s development have been focused on the academic circle, government, and business circle. Since Merton (1974) has applied options pricing model as a technology to evaluate the credit risk of enterprise, it has been drawn a lot of attention from western academic and business circles. Merton¡¦s Model is the theoretical foundation of structural models. Currently, the famous KMV Model in practically is the extension of application of Merton¡¦s Model. Merton¡¦s model is not only based on a strict and comprehensive theory but also used market information stock price as an important variance to evaluate the credit risk. This makes credit risk to be a real-time monitored at a much higher frequency. This advantage has made it widely applied by the academic and business circle for a long time. According to this research topics: (1) Credit risk holds geographical and culture character. Though credit risk evaluating model introduced from the foreign, yet it still has to be modified locally and it also needs more supports from local theory and practical case study. (2)Structural model is based on ¡§look-forward¡¨ analysis. It implies market-based information contents. (3) After prudent and careful analytical consideration about domestic capital market, the electronic business is the mainstream of domestic stock market, and also the competitive business for Taiwan in the world, meantime, electronic business has a higher level of sensitivity in three phases of profit, prosperity and risk. So that, I choose electronic companies in the public stock market as my research target and time frame is across 2004 to 2006, by means of KMV model which is a mainstream of structural model to evaluate credit risk, developed by Moody¡¦s Co. USA. I also referred to ¡§Small and Medium Enterprise Credit Guarantee Fund Main Guarantee Business Default Probability and Credit Risk Valuation Research Report¡¨, authored by C. J. Kuo (2006) for the variable definition and selections giving very thorough considerations. As I proceed a series of research in using EDF (Expected Default Frequency) of KMV model as well as a number of empirical investigation procedures in integrity and individual electronic business. I find out that EDF of KMV model it can obtain the prominent effect in credit risk and the prediction ability in advance. This paper can provide research result as a reference to risk-manager and to assist investors and governor to discern the depth of risks that the enterprise involved and then to decide the policy of strategy investment and level of risk management. Eventually to minimize the cost of credit checking and enterprise capitals, while to maximize the managerial efficiency and the profitability is the contribution of this paper could be.

It is the key what determined the future of a company the economic behavior practiced from the commercial credit, and the performance of a customer decides the probability of the bad debt from the account receivable. To avoid the bad running of a business unit from terrible cash flow from account receivable, and lead to financial crisis or failure, I try to dig in the problem of the business to give credit failure. Finally, I hope to run a system of crisis prediction to avoid this kind of problem. Try to use the KMV Model on the companies which were listed on the stock exchange market belonged to the Printed Circuit Board (PCB) industry from 2004 to 2006. The result of verification ,the Distance-to-Default(DD) average is about 3.4982; and the Expected-Default-Frequency(EDF) probability average locates on 0.0084. In addition , used the size of capitalization and the analysis of financial ratios to evaluate the internal credit line system in a clinical way, and upgrade the risk management of credit, risk judgment measurement to decrease the loss in the meanwhile.

Using a sample of 1007 U.S. bank holding companies from 1995 to 2015, this study investigates whether the use of financial derivatives of U.S. bank holding companies affects distance-to-default, a measure of a bank’s chance of defaulting. My results show that total derivatives and total derivatives for trading purposes do not have any statistically significant impact on distance-to-default. There is, however, a statistically significant correlation between total derivatives for non-trading purposes and distance-to-default. More exposure to total non-trading derivatives decreases distance-to- default, thus making a bank holding company riskier. Further analysis of the results shows that, after the initiation of the Dodd-Frank Act, more exposure to credit derivatives will decrease distance-to-default, therefore increasing the riskiness of a bank holding company.

本文所使用信用風險評價模型為KMV公司用以衡量未上市公司之違約風險的PFM模型(Private Firms Model)，主要的研究標的為美國未上市產險公司。此模型最主要的目的在求出公司的資產市值及資產市值報酬率波動度，並假設資產市值的變動遵循標準幾何布朗運動，因此在產險公司的資產市值小於某值後，該公司即算違約，其中資產市值平均與該值的距離稱為違約距離。而未上市產險公司缺少股價資訊，因此無法用一般的選擇權評價公式求得資產市值及資產市值報酬率波動度，所以先使用可以衡量上市產險公司資產市值的KMV模型(Moody's KMV EDF□)，找出上市公司的資產市值及資產市值報酬率波動度，再找出財務比率與兩者的關係，最後再將這層關係套用到未上市產險公司，如此可以求得未上市產險公司之資產市值及資產市值報酬率波動度。 本文經過實證研究過後，發現套用從1991年到2000年上市產險公司資料中找出的關係，代入2000年的未上市產險公司資料來預測公司於2001年是否違約，其結果發現準確度並不高；接著且再以違約距離和少部份財務變數做為預測模型，代入2001年資料，以預測2002年未上市產險公司的違約與否，其準確率也與先前相近，兩者的解釋能力約都只有六成到七成，雖然如此，還是可以發現違約距離在解釋能力上還是有一定之貢獻，如果可以將違約的樣本群數量□加，應該可以提升預測的準確度。 / This theme is to measure the default probabilities of private P&C firms’ default in the U.S A. The model this paper used is called PFM (Private Firms Model). The asset value and asset volatility could be found by this model, but we must assume that the asset value will follow General Brownian Motion. After finding asset value and asset volatility, the next step is to find the default point. The distance between the expected asset value and the default point is DD (Distance to Default). However, the private P&C firms lack the relative stock information, so the Black-Scholes Option Pricing Model couldn’t be used. In order to find the relationship between the private firms’ asset value and asset volatility, we can use Moody's KMV EDF□ (Expected Default Frequency) credit risk pricing model to measure the public P&C firms’ asset value and its volatility and find the relationship between those and firms’ financial ratios. Using the public firms’ relationship on private firms, the distance to default of the private firms can be found. Through the empirical research, the correct rate of this model on the private P&C firms in the U.S.A is low. Besides, let DD and other financial ratios be the variables to forecast the next year, the correct rate is still low, but we can find that DD’s ability to explain the default probability is 60~70%. Therefore, we can say DD is still the useful variable and if the sample size of default firm can be increase, the correct rate may be promoted.

We examine the impact of Mergers & Acquisitions on credit- and investment risk using a sample of 402 acquisitions by 215 Swedish firms from 2000 to 2020. We find significant evidence that, on average, M&A increases the credit risk and inversely decreases the investment risk of the acquiring firm. Our results indicate that firm credit risk however is positively correlated with investment risk. After controlling for specific deal- and firm characteristics, our findings suggest that managerial hubris decreases the level of credit risk and increases the level of investment risk in acquiring firms. Our results are consistent with the asymmetric information hypothesis that managers may exploit the volatility of their stock price to hide risk-increasing activities. We also observe that acquirers with high pre-deal credit risk undertake acquisitions that decrease credit risk and increase investment risk. We find no significant impact from neither method of payment nor valuation errors.