The Study on Calculation of Credit Risks in China's Internet Finance

Modern information technologies, especially mobile payment, social network, search engine, and cloud computation, will transform financial system in a fundamental way. There will be a new finance mode which is different from commercial banks and security markets. The present Internet finance in China concentrates on financial rules and the risk control and almost every market player encounters the problem on credit evaluation. The whole calculation process is simulated by applying the KMV model, and the asset value volatility (sigma(A)), distance to default (DD) and expected default frequency (EDF) of 18 public companies in China are obtained. The results proves that KMV is feasible and effective in calculating credit risks in the present Internet finance in China and lays a foundation for the further study on building a reliable and standardized system to evaluate the credit risks of on-line transactions.