Credit Risk Market Model (CRMM)

Adopting the concept of Real Options of Merton Model (1974) → Uses daily stock prices to predict a company’s credit risk. After the calibration by TEJ for Taiwan’s market, the predictive ability of CRMM significantly improves and is suitable for Taiwan’s booming stock market and underdeveloped bond market. It is combined with TEJ’s financial database and is tailored for daily risk monitoring.

✨TEJ CRMM Highlights

• 92% High ability to distinguish (ROC)
• ALL Real-time monitoring of risk on trading days
• BEST Ability to predict differences

┃Key Benefit

• Monitoring risks each day.  

┃Key Advantages

• Tested and adjusted by TEJ, the model is suitable for the Taiwan stock market and with high validity.
•  Divided into 9 credit ratings that directly correspond to TCRI makes it easy to be interpreted.
•  Combination with financial information from the TEJ database increases the understandability.

┃Key Features

• Better warning ability in Taiwan market than other well-known models (e.g., Z-Score).
• Time-tested theoretical foundation – Merton Model.
• Uses of stock price and contents such as forward-looking expectations.
• Daily monitoring of risks which avoids limitations of the window period of financial statements.  

CRMM Modeling Procedure

Excellent Prediction and Discriminatory Power

The shorter the final level of the TMR model, the stronger the ability to correctly identify high-risk companies. In addition, using the CRMM model, regardless of the level of indicators in the short, medium, and long-term, the predictive discriminatory ability is much higher than that of the well-known foreign structural model by about 13%.

Industry Relative Risk

Group Risk Monitoring

Monitoring CRMM information on affiliated enterprises of a group and the latest changes in credit risk of each group.

	Major Alerts	CRMM Information (DD, TCRITM, TMR, Rating Adjustments), Market Trading Information, Significant Transaction Alerts, Risk Levels
	Stock Price Alerts	Capital Flow Information, Unusual Activity Alerts
	Financial Alerts	Growth, Safety, Operational Efficiency Information, and Severe Deterioration Alerts
	Board of Directors and Supervisors Alerts	Changes and Deterioration in Directors’ and Supervisors’ Shareholding and Pledging