The purpose of this study is to analyze credit spreads of corporate loans of a commercial bank using the empirical data of that bank. Credit spreads of bank Ioans should cover the expected credit loss in the event of bankruptcy of the company. Therefore the exact measurement and pricing of credit risk is essential in bank loan policy.
In this paper, two methods for credit risk estimating are used. The one is traditional regression method and the other is Merton's model which is one of structural approaches .
The credit spreads of I year maturity corporate loans for a investment grade of Bank K don't have large differences from theoretical ones. However the credit spreads of loans whose maturities are longer than 1 year and non-investment grade show large differences from theoretical ones. Therefore Bank K should increase the credit spreads for corporate loans whose maturities are longer than 1 year and non-investment grades.
