Research on Risk Management of Bank Loan and Loss Provision Based on Markov Chain

With the incomplete information in the credit market, according to the bank loan risk classification of the five principles, the loan risk management has to be used the absorption Markov chain. Then through the establishment and analysis of the state transition probability matrix of bank loan, the bank loan can be carried out risk forecast and management, on which base we can build the forward-looking loan loss provision model on the foundation of Markov chain and provide the feasible method for bank loan administrative decision.