An Empirical Study on the Credit Risk of Listed Real Estate Companies in China Based on the KMV Model

Based on the Black and Scholes (1973) and Merton (1974) (BSM) contingent claims model, and KMV corporation framework, we estimate the distance to default for a sample of 99 listed real estate companies over the period 2002 to 2009. It shows that, KMV model is valid in measuring the credit risk of the real estate companies in China. The sensitivity analysis shows that the volatility of shares value is the most sensitive to the distance to default, but the change of the default point doesn't have significant effect on the distance to default. We also found, the credit statues of listed real estate companies in China fluctuate wildly from 2002 to 2009, and the credit risk is larger.