Articles

Credit Risk Research on Chinese Real Estate Enterprises Based on Modified KMV Model

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This paper first analyses the current situation of credit risk in China’s real estate industry, and then compares the traditional and modern credit risk measurement models. On this basis, the KMV model is selected, and the artificial intelligence model Genetic Algorithm (GA) and GARCH model are introduced to improve the accuracy of the KMV model. Secondly, the annual financial data and stock trading data of 24 real estate listed companies for 2018 – 2022 are selected for empirical research. By analyzing the total default distance of the 24 companies and the actual economic development of China, it is proved that the results of the GA-GARCH-KMV model are 8% more correct than the classical KMV model, which indicates that the model has better applicability.

Portfolio Rebalancing with GARCH Model at Jarvis Balanced Fund

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With high inflation economy, investors must find another way to minimize their risk, but also maximize their return of the portfolio. Various instruments used for finding the most suitable amount of portfolio allocation. Single instruments, such as stocks, bonds, and time deposits is chosen by investors to secure their assets from inflation. The other investors chose mutual funds to grow their investments. One of the solutions to find the portfolio allocation is to rebalance the portfolio. In other perspectives, time-series model will help investors to predict the volatility that will happen in the future. GARCH (Generalized Autoregressive Conditional Heteroskedasticity) model is used for finding volatility and generalized it from the ARCH Model. With GARCH Model, the total amount of residual and GARCH has to be less than 1. Either way, it will be categorized as a volatile asset. From the top 5 balanced fund in 2021, Jarvis Balanced Fund is one of the best-balanced funds with return of 55.85%/year. Using Jarvis Balanced Fund (JBF) portfolio from 2021 prospectus as the sample of this research, it is concluded that JBF has to reduce the number of stocks and increase the risk-free assets to prevent volatility that happen in the portfolio. Following with the macro economy of high-inflation economy era.