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Sample records for modeling credit risk

  1. MODELING CREDIT RISK THROUGH CREDIT SCORING

    OpenAIRE

    Adrian Cantemir CALIN; Oana Cristina POPOVICI

    2014-01-01

    Credit risk governs all financial transactions and it is defined as the risk of suffering a loss due to certain shifts in the credit quality of a counterpart. Credit risk literature gravitates around two main modeling approaches: the structural approach and the reduced form approach. In addition to these perspectives, credit risk assessment has been conducted through a series of techniques such as credit scoring models, which form the traditional approach. This paper examines the evolution of...

  2. Credit Risk Modeling

    DEFF Research Database (Denmark)

    Lando, David

    Credit risk is today one of the most intensely studied topics in quantitative finance. This book provides an introduction and overview for readers who seek an up-to-date reference to the central problems of the field and to the tools currently used to analyze them. The book is aimed at researchers...... and students in finance, at quantitative analysts in banks and other financial institutions, and at regulators interested in the modeling aspects of credit risk. David Lando considers the two broad approaches to credit risk analysis: that based on classical option pricing models on the one hand...

  3. Models of Credit Risk Measurement

    OpenAIRE

    Hagiu Alina

    2011-01-01

    Credit risk is defined as that risk of financial loss caused by failure by the counterparty. According to statistics, for financial institutions, credit risk is much important than market risk, reduced diversification of the credit risk is the main cause of bank failures. Just recently, the banking industry began to measure credit risk in the context of a portfolio along with the development of risk management started with models value at risk (VAR). Once measured, credit risk can be diversif...

  4. A Network Model of Credit Risk Contagion

    Directory of Open Access Journals (Sweden)

    Ting-Qiang Chen

    2012-01-01

    Full Text Available A network model of credit risk contagion is presented, in which the effect of behaviors of credit risk holders and the financial market regulators and the network structure are considered. By introducing the stochastic dominance theory, we discussed, respectively, the effect mechanisms of the degree of individual relationship, individual attitude to credit risk contagion, the individual ability to resist credit risk contagion, the monitoring strength of the financial market regulators, and the network structure on credit risk contagion. Then some derived and proofed propositions were verified through numerical simulations.

  5. Credit Risk Evaluation : Modeling - Analysis - Management

    OpenAIRE

    Wehrspohn, Uwe

    2002-01-01

    An analysis and further development of the building blocks of modern credit risk management: -Definitions of default -Estimation of default probabilities -Exposures -Recovery Rates -Pricing -Concepts of portfolio dependence -Time horizons for risk calculations -Quantification of portfolio risk -Estimation of risk measures -Portfolio analysis and portfolio improvement -Evaluation and comparison of credit risk models -Analytic portfolio loss distributions The thesis contributes to the evaluatio...

  6. Models for assessing and managing credit risk

    Directory of Open Access Journals (Sweden)

    Neogradi Slađana

    2014-01-01

    Full Text Available This essay deals with the definition of a model for assessing and managing credit risk. Risk is an inseparable component of any average and normal credit transaction. Looking at the different aspects of the identification and classification of risk in the banking industry as well as representation of the key components of modern risk management. In the first part of the essay will analyze how the impact of credit risk on bank and empirical models for determining the financial difficulties in which the company can be found. Bank on the basis of these models can reduce number of approved risk assets. In the second part, we consider models for improving credit risk with emphasis on Basel I, II and III, and the third part, we conclude that the most appropriate model and gives the best effect for measuring credit risk in domestic banks.

  7. Statistical credit risk assessment model of small and very small enterprises for Lithuanian credit unions

    OpenAIRE

    Špicas, Renatas

    2017-01-01

    While functioning in accordance with the new, business and efficiency-oriented operating model, credit unions develop and begin functioning outside the community. It is universally recognised in scientific literature that as credit unions expand their activities beyond a community, social relations with credit union members weaken and the credit unions lose their social control element, which help them to better assess and manage information asymmetry and credit risk. So far, the analysis of ...

  8. Incorporating Contagion in Portfolio Credit Risk Models Using Network Theory

    NARCIS (Netherlands)

    Anagnostou, I.; Sourabh, S.; Kandhai, D.

    2018-01-01

    Portfolio credit risk models estimate the range of potential losses due to defaults or deteriorations in credit quality. Most of these models perceive default correlation as fully captured by the dependence on a set of common underlying risk factors. In light of empirical evidence, the ability of

  9. A Macroeconomic Model of Credit Risk in Uruguay

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    Gabriel Illanes

    Full Text Available In this paper we evaluate credit risk of the economy as a whole, aiming at the study of the financial stability. This analysis uses as proxy the credit granted by the banking system. We use a non-linear parametric model based on Merton's structural framework for the analysis of the risk associated to a loan portfolio. In this model, default occurs when the return of an economic agent falls under certain threshold which depends on different macroeconomic variables. We use this model to assess the credit risk module in stress tests for the local banking system. We also estimate the "elasticities" of credit categories correspondig to corporate credit and consumer credit, both in national currency and american dollars. We obtain the parameters for the model using maximum likelihood, where the likelihood function contains a random latent factor which is assumed to follow a normal distribution.

  10. A neural network model for credit risk evaluation.

    Science.gov (United States)

    Khashman, Adnan

    2009-08-01

    Credit scoring is one of the key analytical techniques in credit risk evaluation which has been an active research area in financial risk management. This paper presents a credit risk evaluation system that uses a neural network model based on the back propagation learning algorithm. We train and implement the neural network to decide whether to approve or reject a credit application, using seven learning schemes and real world credit applications from the Australian credit approval datasets. A comparison of the system performance under the different learning schemes is provided, furthermore, we compare the performance of two neural networks; with one and two hidden layers following the ideal learning scheme. Experimental results suggest that neural networks can be effectively used in automatic processing of credit applications.

  11. A Soft Intelligent Risk Evaluation Model for Credit Scoring Classification

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    Mehdi Khashei

    2015-09-01

    Full Text Available Risk management is one of the most important branches of business and finance. Classification models are the most popular and widely used analytical group of data mining approaches that can greatly help financial decision makers and managers to tackle credit risk problems. However, the literature clearly indicates that, despite proposing numerous classification models, credit scoring is often a difficult task. On the other hand, there is no universal credit-scoring model in the literature that can be accurately and explanatorily used in all circumstances. Therefore, the research for improving the efficiency of credit-scoring models has never stopped. In this paper, a hybrid soft intelligent classification model is proposed for credit-scoring problems. In the proposed model, the unique advantages of the soft computing techniques are used in order to modify the performance of the traditional artificial neural networks in credit scoring. Empirical results of Australian credit card data classifications indicate that the proposed hybrid model outperforms its components, and also other classification models presented for credit scoring. Therefore, the proposed model can be considered as an appropriate alternative tool for binary decision making in business and finance, especially in high uncertainty conditions.

  12. Incorporating Contagion in Portfolio Credit Risk Models Using Network Theory

    Directory of Open Access Journals (Sweden)

    Ioannis Anagnostou

    2018-01-01

    Full Text Available Portfolio credit risk models estimate the range of potential losses due to defaults or deteriorations in credit quality. Most of these models perceive default correlation as fully captured by the dependence on a set of common underlying risk factors. In light of empirical evidence, the ability of such a conditional independence framework to accommodate for the occasional default clustering has been questioned repeatedly. Thus, financial institutions have relied on stressed correlations or alternative copulas with more extreme tail dependence. In this paper, we propose a different remedy—augmenting systematic risk factors with a contagious default mechanism which affects the entire universe of credits. We construct credit stress propagation networks and calibrate contagion parameters for infectious defaults. The resulting framework is implemented on synthetic test portfolios wherein the contagion effect is shown to have a significant impact on the tails of the loss distributions.

  13. Empirical Analysis of Farm Credit Risk under the Structure Model

    Science.gov (United States)

    Yan, Yan

    2009-01-01

    The study measures farm credit risk by using farm records collected by Farm Business Farm Management (FBFM) during the period 1995-2004. The study addresses the following questions: (1) whether farm's financial position is fully described by the structure model, (2) what are the determinants of farm capital structure under the structure model, (3)…

  14. Credit Risk Analysis using Machine and Deep Learning models

    OpenAIRE

    Addo , Peter ,; Guegan , Dominique; Hassani , Bertrand

    2018-01-01

    URL des Documents de travail : https://centredeconomiesorbonne.univ-paris1.fr/documents-de-travail-du-ces/; Documents de travail du Centre d'Economie de la Sorbonne 2018.03 - ISSN : 1955-611X; Due to the hyper technology associated to Big Data, data availability and computing power, most banks or lending financial institutions are renewing their business models. Credit risk predictions, monitoring, model reliability and effective loan processing are key to decision making and transparency. In...

  15. Modelling Counterparty Credit Risk in Czech Interest Rate Swaps

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    Lenka Křivánková

    2017-01-01

    Full Text Available According to the Basel Committee’s estimate, three quarters of counterparty credit risk losses during the financial crisis in 2008 originate from credit valuation adjustment’s losses and not from actual defaults. Therefore, from 2015, the Third Basel Accord (EU, 2013a and (EU, 2013b instructed banks to calculate the capital requirement for the risk of credit valuation adjustment (CVA. Banks are trying to model CVA to hold the prescribed standards and also reach the lowest possible impact on their profit. In this paper, we try to model CVA using methods that are in compliance with the prescribed standards and also achieve the smallest possible impact on the bank’s earnings. To do so, a data set of interest rate swaps from 2015 is used. The interest rate term structure is simulated using the Hull-White one-factor model and Monte Carlo methods. Then, the probability of default for each counterparty is constructed. A safe level of CVA is reached in spite of the calculated the CVA achieving a lower level than CVA previously used by the bank. This allows a reduction of capital requirements for banks.

  16. Credit Risk Analysis Using Machine and Deep Learning Models

    Directory of Open Access Journals (Sweden)

    Peter Martey Addo

    2018-04-01

    Full Text Available Due to the advanced technology associated with Big Data, data availability and computing power, most banks or lending institutions are renewing their business models. Credit risk predictions, monitoring, model reliability and effective loan processing are key to decision-making and transparency. In this work, we build binary classifiers based on machine and deep learning models on real data in predicting loan default probability. The top 10 important features from these models are selected and then used in the modeling process to test the stability of binary classifiers by comparing their performance on separate data. We observe that the tree-based models are more stable than the models based on multilayer artificial neural networks. This opens several questions relative to the intensive use of deep learning systems in enterprises.

  17. Credit Risk Research

    DEFF Research Database (Denmark)

    Zamore, Stephen; Ohene Djan, Kwame; Alon, Ilan

    2018-01-01

    This article provides a comprehensive review of scholarly research on credit risk measurement during the last 57 years applying bibliometric citation analysis and elaborates an agenda for future research. The bibliography is compiled using the Institute for Scientific Information (ISI) Web...... of Science (WOS) database and includes all articles with citations over the period 1960–2016. Specifically, the review is carried out using 1695 articles across 72 countries published in 442 journals by 2928 authors. The findings suggest that credit risk research is multifaceted and can be classified...... into six streams: (1) defaultable security pricing, (2) default intensity modeling, (3) comparative analysis of credit models, (4) comparative analysis of credit markets, (5) credit default swap (CDS) pricing, and (6) loan loss provisions. The article contributes through synthesizing and identifying...

  18. Optimal replenishment and credit policy in supply chain inventory model under two levels of trade credit with time- and credit-sensitive demand involving default risk

    Science.gov (United States)

    Mahata, Puspita; Mahata, Gour Chandra; Kumar De, Sujit

    2018-03-01

    Traditional supply chain inventory modes with trade credit usually only assumed that the up-stream suppliers offered the down-stream retailers a fixed credit period. However, in practice the retailers will also provide a credit period to customers to promote the market competition. In this paper, we formulate an optimal supply chain inventory model under two levels of trade credit policy with default risk consideration. Here, the demand is assumed to be credit-sensitive and increasing function of time. The major objective is to determine the retailer's optimal credit period and cycle time such that the total profit per unit time is maximized. The existence and uniqueness of the optimal solution to the presented model are examined, and an easy method is also shown to find the optimal inventory policies of the considered problem. Finally, numerical examples and sensitive analysis are presented to illustrate the developed model and to provide some managerial insights.

  19. Validation Techniques of the Intern Models for Credit Risk

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    Bogdan Moinescu

    2006-11-01

    Full Text Available The new own funds adequacy device, officialy named “ International Convergence of Capital Measurement and Capital Standards”, describes the most important benchmark framework for micro-prudential supervision at the moment. The publication of the final text in June 2004, after five years of deliberations, represents the result of multiple analyses and comments provided by all interested parties, banking supervision authorities, associations and credit institutions. Provided the development of complex methodologies of risk measurement and management, on a large scale, by credit institutions, simple and static rules of the first accord have become less and less relevant during the last years. And so, the need of setting up a own funds adequacy framework which is much more risk sensitive and provides incentives to credit institutions on what concerns the improvement of risk measurement and management systems was met by approval of the Basel II Accord, which will, therefore, lead to the strengthening of financial stability. The revisal of the Accord was mainly focused on the increase of risk analysis and internal measurement and the changes made to their estimation allow banks to create their own methodological framework to calculate capital requirements (also considering each credit institution’ risk appetite.

  20. Dynamic Bayesian modeling for risk prediction in credit operations

    DEFF Research Database (Denmark)

    Borchani, Hanen; Martinez, Ana Maria; Masegosa, Andres

    2015-01-01

    Our goal is to do risk prediction in credit operations, and as data is collected continuously and reported on a monthly basis, this gives rise to a streaming data classification problem. Our analysis reveals some practical problems that have not previously been thoroughly analyzed in the context...

  1. Application of Vine Copulas to Credit Portfolio Risk Modeling

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    Marco Geidosch

    2016-06-01

    Full Text Available In this paper, we demonstrate the superiority of vine copulas over conventional copulas when modeling the dependence structure of a credit portfolio. We show statistical and economic implications of replacing conventional copulas by vine copulas for a subportfolio of the Euro Stoxx 50 and the S&P 500 companies, respectively. Our study includes D-vines and R-vines where the bivariate building blocks are chosen from the Gaussian, the t and the Clayton family. Our findings are (i the conventional Gauss copula is deficient in modeling the dependence structure of a credit portfolio and economic capital is seriously underestimated; (ii D-vine structures offer a better statistical fit to the data than classical copulas, but underestimate economic capital compared to R-vines; (iii when mixing different copula families in an R-vine structure, the best statistical fit to the data can be achieved which corresponds to the most reliable estimate for economic capital.

  2. Credit risk transfer

    OpenAIRE

    Bank for International Settlements

    2003-01-01

    Executive summary Techniques for transferring credit risk, such as financial guarantees and credit insurance, have been a long-standing feature of financial markets. In the past few years, however, the range of credit risk transfer (CRT) instruments and the circumstances in which they are used have widened considerably. A number of factors have contributed to this growth, including: greater focus by banks and other financial institutions on risk management; a more rigorous approach to risk/re...

  3. Modern bank's credit risk

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    Šabović Šerif

    2015-01-01

    Full Text Available Credit risk is the most important risk banks have to face with. It occurs due to an obligation created because of debtors' capital and interest rate nonpayment. Debtors obligations non-fulfilment may lead to great losses and insolvency in bank's business. Credit risk is the crucial reason of bank's insolvency. Over 80% of bank's balance sheet is exposed to credit risk.

  4. Survey of credit risk models in relation to capital adequacy framework for financial institutions

    Directory of Open Access Journals (Sweden)

    Poomjai Nacaskul

    2016-12-01

    Full Text Available This article (i iterates what is meant by credit risks and the mathematical-statistical modelling thereof, (ii elaborates the conceptual and technical links between credit risk modelling and capital adequacy framework for financial institutions, particularly as per the New Capital Accord (Basel II’s Internal Ratings-Based (IRB approach, (iii proffer a simple and intuitive taxonomy on contemporary credit risk modelling methodologies, and (iv discuses in some details a number of key models pertinent, in various stages of development, to various application areas in the banking and financial sector.

  5. Dynamic Multi-Factor Credit Risk Model with Fat-Tailed Factors

    Czech Academy of Sciences Publication Activity Database

    Gapko, Petr; Šmíd, Martin

    2012-01-01

    Roč. 62, č. 2 (2012), s. 125-140 ISSN 0015-1920 R&D Projects: GA ČR GD402/09/H045; GA ČR GA402/09/0965 Grant - others:Univerzita Karlova(CZ) GAUK 46108 Institutional research plan: CEZ:AV0Z10750506 Keywords : credit risk * probability of default * loss given default * credit loss * credit loss distribution * Basel II Subject RIV: AH - Economics Impact factor: 0.340, year: 2012 http://library.utia.cas.cz/separaty/2012/E/smid-dynamic multi-factor credit risk model with fat-tailed factors.pdf

  6. Modelling local government unit credit risk in the Republic of Croatia

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    Petra Posedel

    2012-12-01

    Full Text Available The objective of this paper is to determine possible indicators that affect local unit credit risk and investigate their effect on default (credit risk of local government units in Croatia. No system for the estimation of local unit credit risk has been established in Croatia so far causing many practical problems in local unit borrowing. Because of the specific nature of the operations of local government units and legislation that does not allow local government units to go into bankruptcy, conventional methods for estimating credit risk are not applicable, and the set of standard potential determinants of credit risk has to be expanded with new indicators. Thus in the paper, in addition to the usual determinants of credit risk, the hypothesis of the influence of political factors on local unit credit risk in Croatia is also tested out, with the use of a Tobit model. Results of econometric analysis show that credit risk of local government units in Croatia is affected by the political structure of local government, the proportion of income tax and surtax in operating revenue, the ratio of net operating balance, net financial liabilities and direct debt to operating revenue, as well as the ratio of debt repayment and cash, and direct debt and operating revenue.

  7. Credit risk management in banks

    OpenAIRE

    Pětníková, Tereza

    2014-01-01

    The subject of this diploma thesis is managing credit risk in banks, as the most significant risk faced by banks. The aim of this work is to define the basic techniques, tools and methods that are used by banks to manage credit risk. The first part of this work focuses on defining these procedures and describes the entire process of credit risk management, from the definition of credit risk, describing credit strategy and policy, organizational structure, defining the most used credit risk mi...

  8. On Partial Defaults in Portfolio Credit Risk : A Poisson Mixture Model Approach

    OpenAIRE

    Weißbach, Rafael; von Lieres und Wilkau, Carsten

    2005-01-01

    Most credit portfolio models exclusively calculate the loss distribution for a portfolio of performing counterparts. Conservative default definitions cause considerable insecurity about the loss for a long time after the default. We present three approaches to account for defaulted counterparts in the calculation of the economic capital. Two of the approaches are based on the Poisson mixture model CreditRisk+ and derive a loss distribution for an integrated portfolio. The third method treats ...

  9. Credit Risk Evaluation Using a C-Variable Least Squares Support Vector Classification Model

    Science.gov (United States)

    Yu, Lean; Wang, Shouyang; Lai, K. K.

    Credit risk evaluation is one of the most important issues in financial risk management. In this paper, a C-variable least squares support vector classification (C-VLSSVC) model is proposed for credit risk analysis. The main idea of this model is based on the prior knowledge that different classes may have different importance for modeling and more weights should be given to those classes with more importance. The C-VLSSVC model can be constructed by a simple modification of the regularization parameter in LSSVC, whereby more weights are given to the lease squares classification errors with important classes than the lease squares classification errors with unimportant classes while keeping the regularized terms in its original form. For illustration purpose, a real-world credit dataset is used to test the effectiveness of the C-VLSSVC model.

  10. Using Cutting-Edge Tree-Based Stochastic Models to Predict Credit Risk

    Directory of Open Access Journals (Sweden)

    Khaled Halteh

    2018-05-01

    Full Text Available Credit risk is a critical issue that affects banks and companies on a global scale. Possessing the ability to accurately predict the level of credit risk has the potential to help the lender and borrower. This is achieved by alleviating the number of loans provided to borrowers with poor financial health, thereby reducing the number of failed businesses, and, in effect, preventing economies from collapsing. This paper uses state-of-the-art stochastic models, namely: Decision trees, random forests, and stochastic gradient boosting to add to the current literature on credit-risk modelling. The Australian mining industry has been selected to test our methodology. Mining in Australia generates around $138 billion annually, making up more than half of the total goods and services. This paper uses publicly-available financial data from 750 risky and not risky Australian mining companies as variables in our models. Our results indicate that stochastic gradient boosting was the superior model at correctly classifying the good and bad credit-rated companies within the mining sector. Our model showed that ‘Property, Plant, & Equipment (PPE turnover’, ‘Invested Capital Turnover’, and ‘Price over Earnings Ratio (PER’ were the variables with the best explanatory power pertaining to predicting credit risk in the Australian mining sector.

  11. Two retailer-supplier supply chain models with default risk under trade credit policy.

    Science.gov (United States)

    Wu, Chengfeng; Zhao, Qiuhong

    2016-01-01

    The purpose of the paper is to formulate two uncooperative replenishment models with demand and default risk which are the functions of the trade credit period, i.e., a Nash equilibrium model and a supplier-Stackelberg model. Firstly, we present the optimal results of decentralized decision and centralized decision without trade credit. Secondly, we derive the existence and uniqueness conditions of the optimal solutions under the two games, respectively. Moreover, we present a set of theorems and corollary to determine the optimal solutions. Finally, we provide an example and sensitivity analysis to illustrate the proposed strategy and optimal solutions. Sensitivity analysis reveals that the total profits of supply chain under the two games both are better than the results under the centralized decision only if the optimal trade credit period isn't too short. It also reveals that the size of trade credit period, demand, retailer's profit and supplier's profit have strong relationship with the increasing demand coefficient, wholesale price, default risk coefficient and production cost. The major contribution of the paper is that we comprehensively compare between the results of decentralized decision and centralized decision without trade credit, Nash equilibrium and supplier-Stackelberg models with trade credit, and obtain some interesting managerial insights and practical implications.

  12. Portfolio Sensitivity Model for Analyzing Credit Risk Caused by Structural and Macroeconomic Changes

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    Goran Klepac

    2008-12-01

    Full Text Available This paper proposes a new model for portfolio sensitivity analysis. The model is suitable for decision support in financial institutions, specifically for portfolio planning and portfolio management. The basic advantage of the model is the ability to create simulations for credit risk predictions in cases when we virtually change portfolio structure and/or macroeconomic factors. The model takes a holistic approach to portfolio management consolidating all organizational segments in the process such as marketing, retail and risk.

  13. Study of Commercial Bank Risk Monitoring Model in Individual Consumption Credit

    Institute of Scientific and Technical Information of China (English)

    刘春红

    2003-01-01

    With the development of individual consumption credit (ICC) in China, commercial banks have been exposed to more and more risks. The loan failure has been an important problem that the banking must face and revolve. This paper develops a factor system to explain how the borrower's risk is affected, and then establishes a risk monitoring model with AHP to pre-warn the banks how much the risk is.

  14. Quantile Forecasting for Credit Risk Management Using Possibly Mis-specified Hidden Markov Models

    NARCIS (Netherlands)

    Banachewicz, K.P.; Lucas, A.

    2008-01-01

    Recent models for credit risk management make use of hidden Markov models (HMMs). HMMs are used to forecast quantiles of corporate default rates. Little research has been done on the quality of such forecasts if the underlying HMM is potentially misspecified. In this paper, we focus on

  15. Using multi-state markov models to identify credit card risk

    Directory of Open Access Journals (Sweden)

    Daniel Evangelista Régis

    2016-06-01

    Full Text Available Abstract The main interest of this work is to analyze the application of multi-state Markov models to evaluate credit card risk by investigating the characteristics of different state transitions in client-institution relationships over time, thereby generating score models for various purposes. We also used logistic regression models to compare the results with those obtained using multi-state Markov models. The models were applied to an actual database of a Brazilian financial institution. In this application, multi-state Markov models performed better than logistic regression models in predicting default risk, and logistic regression models performed better in predicting cancellation risk.

  16. Risk adjustment model of credit life insurance using a genetic algorithm

    Science.gov (United States)

    Saputra, A.; Sukono; Rusyaman, E.

    2018-03-01

    In managing the risk of credit life insurance, insurance company should acknowledge the character of the risks to predict future losses. Risk characteristics can be learned in a claim distribution model. There are two standard approaches in designing the distribution model of claims over the insurance period i.e, collective risk model and individual risk model. In the collective risk model, the claim arises when risk occurs is called individual claim, accumulation of individual claim during a period of insurance is called an aggregate claim. The aggregate claim model may be formed by large model and a number of individual claims. How the measurement of insurance risk with the premium model approach and whether this approach is appropriate for estimating the potential losses occur in the future. In order to solve the problem Genetic Algorithm with Roulette Wheel Selection is used.

  17. Credit derivatives and risk management

    OpenAIRE

    Michael S. Gibson

    2007-01-01

    The striking growth of credit derivatives suggests that market participants find them to be useful tools for risk management. I illustrate the value of credit derivatives with three examples. A commercial bank can use credit derivatives to manage the risk of its loan portfolio. An investment bank can use credit derivatives to manage the risks it incurs when underwriting securities. An investor, such as an insurance company, asset manager, or hedge fund, can use credit derivatives to align its...

  18. Internal Model of Commercial Bank as an Instrument for Measuring Credit Risk of the Borrower in Relation to Financial Performance (Credit Scoring and Bankruptcy Models

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    Belás Jaroslav

    2011-12-01

    Full Text Available Commercial banks generally use different methods and procedures for managing credit risk. The internal rating method in which the client has an important position in the process of granting credit provides a comprehensive assessment of client creditworthiness. The aim of this article is to analyze selected theoretical, methodological and practical aspects of internal rating models of commercial banks within the context of models that measures financial performance and to make a comparison of results of real - rating models which are used in the Czech Republic and Slovakia. The results of the chosen credit scoring and bankruptcy methods on selected companies from segments of small and medium-sized companies are presented.

  19. Explaining the level of credit spreads: Option-implied jump risk premia in a firm value model

    NARCIS (Netherlands)

    Cremers, K.J.M.; Driessen, J.; Maenhout, P.

    2008-01-01

    We study whether option-implied jump risk premia can explain the high observed level of credit spreads. We use a structural jump-diffusion firm value model to assess the level of credit spreads generated by option-implied jump risk premia. Prices and returns of equity index and individual options

  20. Review of Research on Credit Risk Management for Rural Credit Cooperatives

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    Xin Song

    2017-03-01

    Full Text Available With the rapid development of rural micro-credit, whether the qagriculture, rural areas and farmersq problems have been effectively solved, whether the credit risk has been effectively controlled, these have become the focus of our attention to the rural economic environment. The main content of this paper contains four aspects: the classification and characteristics of credit risk, the problems and factors of credit risk, the model and evaluation of credit risk, the countermeasures and suggestions of credit risk. This paper reviews the research of credit risk management for rural credit cooperatives from the above four aspects, and makes a brief summary.

  1. APPLICATION OF KMV MODEL TO ASSESS CREDIT RISK OF INDIVIDUAL ENTREPRENEURS

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    Taishin A. A.

    2014-09-01

    Full Text Available The problem of credit risk is relevant for the bank. The purpose of scientific research - to develop a technique of adaptation and application of the model for the evaluation risk of KMV Russian entrepreneurs. The proposed method of evaluation credit risk of KMV Russian entrepreneurs has many advantages. Automation of calculations, based on plausible assumptions, will significantly reduce the time to process the customer's request. The article contains analysis of the KMV model based on the up-to-date results of the theory. The author investigates the possibility of modification, generalization of the model and practical implementation of the risk estimate of default entrepreneur KMV model using software package Visual Basic for Application on the example Management reporting of the entrepreneur. Showing the features of its application in the light of the modern achievements in the theory and practice of financial analysis. In this article suggested the finished result of evaluation risk of KMV Russian entrepreneurs, for risk assessment offered more precise recommendations for the practical use of KMV as a basic tool.

  2. KARAKTERISTIK PERUSAHAAN DAN CREDIT RISK

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    Erma Wahdani Permanasari

    2014-05-01

    Full Text Available The purpose of this study is to determine the effect of characteristic of firm to the level of creditrisk. Characteristics of the firm is proxied by size, leverage, spread ownership, net profit margin,return on equity, industry type and scope of the company’s operations. Measurement of level creditrisk uses PT Pefindo bond rating. Annual reports of listed companies in PT Pefindo and IndonesiaStock Exchange (IDX 2010-2011 are collected based on purposive sampling techniques. Thepopulation is 238 companies. Sample used amounted to 84 companies. The analysis model usedin this study is multiple linear regression. Results of this study indicate that the level of corporatecredit risk in Indonesia is high because it is below the 50.00%. The test result of multiple regressionshowed that firm of characteristic affect the level of credit risk. Firm characteristics that affectthe level of credit risk are size, leverage, dispersion of ownership, net profit margin and returnon equity.

  3. A statistical modeling approach to build expert credit risk rating systems

    DEFF Research Database (Denmark)

    Waagepetersen, Rasmus

    2010-01-01

    This paper presents an efficient method for extracting expert knowledge when building a credit risk rating system. Experts are asked to rate a sample of counterparty cases according to creditworthiness. Next, a statistical model is used to capture the relation between the characteristics...... of a counterparty and the expert rating. For any counterparty the model can identify the rating, which would be agreed upon by the majority of experts. Furthermore, the model can quantify the concurrence among experts. The approach is illustrated by a case study regarding the construction of an application score...

  4. Handling Uncertainty in Social Lending Credit Risk Prediction with a Choquet Fuzzy Integral Model

    OpenAIRE

    Namvar, Anahita; Naderpour, Mohsen

    2018-01-01

    As one of the main business models in the financial technology field, peer-to-peer (P2P) lending has disrupted traditional financial services by providing an online platform for lending money that has remarkably reduced financial costs. However, the inherent uncertainty in P2P loans can result in huge financial losses for P2P platforms. Therefore, accurate risk prediction is critical to the success of P2P lending platforms. Indeed, even a small improvement in credit risk prediction would be o...

  5. CONTINGENCIES FOR MEASUREMENT OF THE CREDIT RISK

    Directory of Open Access Journals (Sweden)

    Marinela BARBULESCU

    2015-12-01

    Full Text Available The Global Financial Crisis, which affected various banks, some of them very important banks, highlighted the importance of an accurate credit risk measurement in order to be able to overcome it. There are a variety of such credit risk measurement models, so we can say that banks face a real dilemma when having to choose the most appropriate one. The aim of this paper is to examine the most popular methods used to measure the credit risk and to identify the strengths and the weaknesses of each one of it. The research was accomplished from a double perspective, in which the conceptual methodological approach is correlated to a variety of references to practical actions aiming the measurement and the prevention of credit risk. The study includes the presentation of the objectives of credit risk analysis, the most appropriate moments for doing such an analysis, the steps that have to be done in order to measure the credit risk, the errors that can overcome in the credit risk measurement system, generated by the misclassifications of the studied company, and the presentation of the specific information of financial creditors. The findings expressed in this paper were mainly the result of a qualitative analysis which showed that there is no best model for credit risk measurement, each one having both strengths and weaknesses, some providing a comprehensive analysis of the individual customer’s financial strength others allowing banks permanently monitor fluctuating default risk and identify the possibly problems at an early stage.

  6. Credit risk migration rates modeling as open systems: A micro-simulation approach

    Science.gov (United States)

    Landini, S.; Uberti, M.; Casellina, S.

    2018-05-01

    The last financial crisis of 2008 stimulated the development of new Regulatory Criteria (commonly known as Basel III) that pushed the banking activity to become more prudential, either in the short and the long run. As well known, in 2014 the International Accounting Standards Board (IASB) promulgated the new International Financial Reporting Standard 9 (IFRS 9) for financial instruments that will become effective in January 2018. Since the delayed recognition of credit losses on loans was identified as a weakness in existing accounting standards, the IASB has introduced an Expected Loss model that requires more timely recognition of credit losses. Specifically, new standards require entities to account both for expected losses from when the impairments are recognized for the first time and for full loan lifetime; moreover, a clear preference toward forward looking models is expressed. In this new framework, it is necessary a re-thinking of the widespread standard theoretical approach on which the well known prudential model is founded. The aim of this paper is then to define an original methodological approach to migration rates modeling for credit risk which is innovative respect to the standard method from the point of view of a bank as well as in a regulatory perspective. Accordingly, the proposed not-standard approach considers a portfolio as an open sample allowing for entries, migrations of stayers and exits as well. While being consistent with the empirical observations, this open-sample approach contrasts with the standard closed-sample method. In particular, this paper offers a methodology to integrate the outcomes of the standard closed-sample method within the open-sample perspective while removing some of the assumptions of the standard method. Three main conclusions can be drawn in terms of economic capital provision: (a) based on the Markovian hypothesis with a-priori absorbing state at default, the standard closed-sample method is to be abandoned

  7. Integration Of Company’s Financial Data In Credit Risk Assessment Using A Multidimensional Model

    Directory of Open Access Journals (Sweden)

    Maria – Monica Haralambie

    2015-12-01

    Full Text Available This paper is a detailed overview from theoretical and practical perspectives of a scoring system used by a financial institution in assessing the credit risk of a corporate client. The objective of this research was to demonstrate the importance of a scoring system for a credit institution when approving a loan application of a potential borrower. The complexity and importance of the topic makes it a subject of high interest for all type of credit institutions. We believe that through this work we were able to bring into discussion only a part of the specific issues related to credit risk management scoring systems and we believe that this work represents a support for future research

  8. Grading the probabilities of credit default risk for Malaysian listed companies by using the KMV-Merton model

    Science.gov (United States)

    Anuwar, Muhammad Hafidz; Jaffar, Maheran Mohd

    2017-08-01

    This paper provides an overview for the assessment of credit risk specific to the banks. In finance, risk is a term to reflect the potential of financial loss. The risk of default on loan may increase when a company does not make a payment on that loan when the time comes. Hence, this framework analyses the KMV-Merton model to estimate the probabilities of default for Malaysian listed companies. In this way, banks can verify the ability of companies to meet their loan commitments in order to overcome bad investments and financial losses. This model has been applied to all Malaysian listed companies in Bursa Malaysia for estimating the credit default probabilities of companies and compare with the rating given by the rating agency, which is RAM Holdings Berhad to conform to reality. Then, the significance of this study is a credit risk grade is proposed by using the KMV-Merton model for the Malaysian listed companies.

  9. Credit risk assessment model for Jordanian commercial banks: Neural scoring approach

    Directory of Open Access Journals (Sweden)

    Hussain Ali Bekhet

    2014-01-01

    Full Text Available Despite the increase in the number of non-performing loans and competition in the banking market, most of the Jordanian commercial banks are reluctant to use data mining tools to support credit decisions. Artificial neural networks represent a new family of statistical techniques and promising data mining tools that have been used successfully in classification problems in many domains. This paper proposes two credit scoring models using data mining techniques to support loan decisions for the Jordanian commercial banks. Loan application evaluation would improve credit decision effectiveness and control loan office tasks, as well as save analysis time and cost. Both accepted and rejected loan applications, from different Jordanian commercial banks, were used to build the credit scoring models. The results indicate that the logistic regression model performed slightly better than the radial basis function model in terms of the overall accuracy rate. However, the radial basis function was superior in identifying those customers who may default.

  10. Credit risk assessment: Evidence from banking industry

    Directory of Open Access Journals (Sweden)

    Hassan Ghodrati

    2014-08-01

    Full Text Available Measuring different risk factors such as credit risk in banking industry has been an interesting area of studies. The artificial neural network is a nonparametric method developed to succeed for measuring credit risk and this method is applied to measure the credit risk. This research’s neural network follows back propagation paradigm, which enables it to use historical data for predicting future values with very good out of sample fitting. Macroeconomic variables including GDP, exchange rate, inflation rate, stock price index, and M2 are used to forecast credit risk for two Iranian banks; namely Saderat and Sarmayeh over the period 2007-2011. Research data are being tested for ADF and Causality Granger tests before entering the ANN to achieve the best lag structure for the research model. MSE and R values for the developed ANN in this research respectively are 86×〖10〗^(-4 and 0.9885, respectively. The results showed that ANN was able to predict banks’ credit risk with low error. Sensibility analyses which has accomplished on this research’s ANN corroborates that M2 has the highest effect on the ANN’s credit risk and should be considered as an additional leading indicator by Iran’s banking authorities. These matters confirm validation of macroeconomic notions in Iran’s credit systematic risk.

  11. Insurability of export credit risks

    NARCIS (Netherlands)

    Alsem, K.J.; Antufjew, J.; Huizingh, K.R.E.; Koning, Ruud H.; Sterken, E.; Woltil, M.

    2003-01-01

    Firms exporting their goods and services abroad face risks that are different from the risks faced by firms who do not engage in international trade. It is common practice to allow the receiving party to pay in instalments. The exporting firm faces credit risk, but as in most countries, Dutch firms

  12. CREDIT RISK MINIMIZATION WAYS AND PRICING OF BANKING SERVICES

    Directory of Open Access Journals (Sweden)

    V. E. Gladkova

    2011-01-01

    Full Text Available Accurate accounting of own expenses on rendering banking services and forming reasonable prices for them make it possible for commercial banks to adequately react to market situation changes. Credit risk minimization comprises: credit rationing (in Russia according to RF Central Bank norms; credit diversification; credit structuring; and forming reserves to cover respective bank risks (also in accordance with RF CB documents. Effective is bank credit hedging (insuring through credit derivatives. Most advanced at international finance markets are such risk minimization systems as Basel-II and IRBA. Pricing models based on individual assessment of each borrower’s risk class (Risk Based Pricing approach are widely used.

  13. Counterparty Credit Risk on the Blockchain

    OpenAIRE

    Starlander, Isak

    2017-01-01

    Counterparty credit risk is present in trades offinancial obligations. This master thesis investigates the up and comingtechnology blockchain and how it could be used to mitigate counterparty creditrisk. The study intends to cover essentials of the mathematical model expectedloss, along with an introduction to the blockchain technology. After modellinga simple smart contract and using historical financial data, it was evidentthat there is a possible opportunity to reduce counterparty credit r...

  14. Valuing Catastrophe Bonds Involving Credit Risks

    Directory of Open Access Journals (Sweden)

    Jian Liu

    2014-01-01

    Full Text Available Catastrophe bonds are the most important products in catastrophe risk securitization market. For the operating mechanism, CAT bonds may have a credit risk, so in this paper we consider the influence of the credit risk on CAT bonds pricing that is different from the other literature. We employ the Jarrow and Turnbull method to model the credit risks and get access to the general pricing formula using the Extreme Value Theory. Furthermore, we present an empirical pricing study of the Property Claim Services data, where the parameters in the loss function distribution are estimated by the MLE method and the default probabilities are deduced by the US financial market data. Then we get the catastrophe bonds value by the Monte Carlo method.

  15. Credit default swaps and risk-shifting

    NARCIS (Netherlands)

    Campello, M.; Matta, R.

    2012-01-01

    Credit default swaps (CDSs) are thought to ease borrowing by protecting lenders against default. This paper develops a model of the demand for CDS when borrowers choose the riskiness of investment and verification is imperfect. The model shows that CDSs may lead to risk-shifting, increasing the

  16. Credit Risk Transfer and Crunches

    DEFF Research Database (Denmark)

    Wigan, Duncan

    2010-01-01

    Rather than in terms of the inevitable demise of a destabilising process of speculation, this article explores the ‘credit crunch’ as a window on the fabrication, and measure of the proportions of a political shift driven by market actors and financial innovation. The Basel process reconceptualised...... banks as risk navigators and generated a competitive hierarchy within the global banking industry determined on a gauge of this capacity. This private regulatory regime promoted market inflation and rendered institutional liquidity and risk transfer definitive of market power. In turn, a ballooning...... credit derivatives market broke the limits of financial production and defined state actions in the face of crisis. A shift from a central concern with solvency to that of liquidity thinly masks a profound redistribution of power from the public to the private. By swapping private assets of uncertain...

  17. 76 FR 24089 - Credit Risk Retention

    Science.gov (United States)

    2011-04-29

    ... 17 CFR Part 246 Department of Housing and Urban Development 24 CFR Part 267 Credit Risk Retention... 2501-AD53 Credit Risk Retention AGENCIES: Office of the Comptroller of the Currency, Treasury (OCC..., Commission, FHFA, and HUD (the Agencies) are proposing rules to implement the credit risk retention...

  18. 76 FR 34010 - Credit Risk Retention

    Science.gov (United States)

    2011-06-10

    ... 2501-AD53 Credit Risk Retention AGENCIES: Office of the Comptroller of the Currency, Treasury (OCC... credit risk retention requirements of section 15G of the Securities Exchange Act of 1934, as added by the Dodd-Frank Wall Street Reform and Consumer Protection Act (``Credit Risk NPR'' or ``proposed rule...

  19. A random matrix approach to credit risk.

    Science.gov (United States)

    Münnix, Michael C; Schäfer, Rudi; Guhr, Thomas

    2014-01-01

    We estimate generic statistical properties of a structural credit risk model by considering an ensemble of correlation matrices. This ensemble is set up by Random Matrix Theory. We demonstrate analytically that the presence of correlations severely limits the effect of diversification in a credit portfolio if the correlations are not identically zero. The existence of correlations alters the tails of the loss distribution considerably, even if their average is zero. Under the assumption of randomly fluctuating correlations, a lower bound for the estimation of the loss distribution is provided.

  20. A random matrix approach to credit risk.

    Directory of Open Access Journals (Sweden)

    Michael C Münnix

    Full Text Available We estimate generic statistical properties of a structural credit risk model by considering an ensemble of correlation matrices. This ensemble is set up by Random Matrix Theory. We demonstrate analytically that the presence of correlations severely limits the effect of diversification in a credit portfolio if the correlations are not identically zero. The existence of correlations alters the tails of the loss distribution considerably, even if their average is zero. Under the assumption of randomly fluctuating correlations, a lower bound for the estimation of the loss distribution is provided.

  1. Credit Rationing Effects of Credit Value-at-Risk

    NARCIS (Netherlands)

    J.F. Slijkerman; D.J.C. Smant (David); C.G. de Vries (Casper)

    2004-01-01

    textabstractBanks provide risky loans to firms which have superior information regarding the quality of their projects. Due to asymmetric information the banks face the risk of adverse selection. Credit Value-at-Risk (CVaR) regulation counters the problem of low quality, i.e. high risk, loans and

  2. Information Asymmetry and Credit Risk

    Directory of Open Access Journals (Sweden)

    Lorena TUPANGIU

    2017-11-01

    Full Text Available Information asymmetry defines relationships where an agent holds information while another does not hold it. Thus, to the extent that one of the parties to the financing agreement has information more or less accurate than another, the asymmetry of information appears to be a major constraint in the financing of a project. Banks, in their capacity of financial intermediary, operate the transfer of funds to agents in need of financing, to the borrowers, being necessary in this process to have more information in order to benefit of expertise in assessing borrowers. The research of information asymmetry and credit risk consists of interrogating the following aspects: information issues between the bank and borrowers; settlement of information issues; bank’s activism towards information asymmetry. In our approach we will look at the first aspect, namely the information issues between the bank and the borrowers.

  3. Credit Risk Management in Chinese Banking Industry

    OpenAIRE

    Zhang, Lei

    2006-01-01

    Abstract Credit risk is by far the most important risk faced by banks, and it influences the bank profitability and its long-term operation significantly. Well management on credit risk can be a competitive advantage for banks in the competitive banking industry. Chinese banks suffer from serious financial fragility manifested by high proportions of NPLs and low capital adequacy ratios (Bonin and Huang, 2001). This dissertation examines the real credit performance of Chinese banks ba...

  4. Credit risk management in the power sector

    International Nuclear Information System (INIS)

    Allen, D.

    2002-01-01

    Deregulation of the electric power industry has the potential to put power businesses at market risk particularly when the value of an asset or liability will change with market movements. Market risk gives rise to credit risk where a contract cannot be fulfilled. This presentation describes how credit risks can be identified and measured. Most practitioners use some variant of value-at-risk (VAR) technology for measuring market risk. Under this approach, risk is determined by the volatility implied by the market. Volatility of electricity prices and natural gas prices has increased significantly in Alberta in recent years. The consequence is an increase in both market and credit risk. The author described the difference between the two risks and their significance. An overview of credit risk management with derivatives, an over-the counter contract, was also presented. The author also discusses issue of protection buyers in the event of a failed contract. 9 figs

  5. THE CREDIT AND CREDIT RISK MANAGEMENT DURING THE CRISIS

    Directory of Open Access Journals (Sweden)

    Chitan Gheorghe

    2012-03-01

    Full Text Available Considering the importance of credit risk management to ensure the financial system stability,the paper presents financial and real sector interaction highlighting that credit growth based on increase of creditdemand, of income, of assets prices, of currency availability, the interest rate differential between countries andrelaxation of regulatory framework, leaves banks more vulnerable to subsequent downturn in economic activity andasset prices. It also outlines the steps taken or those I think that should be implemented in terms of improving creditrisk management, implementation of regulatory measures to limit credit expansion, enforcing the regulatoryrequirements for covering the expected and unexpected losses, introduction of new surveillance tools aimed to leadto a more resilient financial system.

  6. Sovereign Credit Risk, Liquidity and ECB Intervention

    DEFF Research Database (Denmark)

    Pelizzon, Loriana; Subrahmanyam, Marti G.; Tomio, Davide

    This paper explores the interaction between credit risk and liquidity, in the context of the intervention by the European Central Bank (ECB), during the Euro-zone crisis. The laboratory for our investigation is the Italian sovereign bond market, the largest in the Euro-zone. We use a unique data...... between changes in Italian sovereign credit risk and liquidity in the secondary bond market, conditional on the level of credit risk, measured by the Italian sovereign credit default swap (CDS) spread. We demonstrate the existence of a threshold of 500 basis points (bp) in the CDS spread, above which...... there is a structural change in this relationship. Other global systemic factors also a ffect market liquidity, but the speci c credit risk of primary dealers plays only a modest role in a ffecting market liquidity, especially under conditions of stress. Moreover, the data indicate that there is a clear structural...

  7. Modeling Cycle Dependence in Credit Insurance

    Directory of Open Access Journals (Sweden)

    Anisa Caja

    2014-03-01

    Full Text Available Business and credit cycles have an impact on credit insurance, as they do on other businesses. Nevertheless, in credit insurance, the impact of the systemic risk is even more important and can lead to major losses during a crisis. Because of this, the insurer surveils and manages policies almost continuously. The management actions it takes limit the consequences of a downturning cycle. However, the traditional modeling of economic capital does not take into account this important feature of credit insurance. This paper proposes a model aiming to estimate future losses of a credit insurance portfolio, while taking into account the insurer’s management actions. The model considers the capacity of the credit insurer to take on less risk in the case of a cycle downturn, but also the inverse, in the case of a cycle upturn; so, losses are predicted with a more dynamic perspective. According to our results, the economic capital is over-estimated when not considering the management actions of the insurer.

  8. Modelling the predictive performance of credit scoring

    Directory of Open Access Journals (Sweden)

    Shi-Wei Shen

    2013-07-01

    Research purpose: The purpose of this empirical paper was to examine the predictive performance of credit scoring systems in Taiwan. Motivation for the study: Corporate lending remains a major business line for financial institutions. However, in light of the recent global financial crises, it has become extremely important for financial institutions to implement rigorous means of assessing clients seeking access to credit facilities. Research design, approach and method: Using a data sample of 10 349 observations drawn between 1992 and 2010, logistic regression models were utilised to examine the predictive performance of credit scoring systems. Main findings: A test of Goodness of fit demonstrated that credit scoring models that incorporated the Taiwan Corporate Credit Risk Index (TCRI, micro- and also macroeconomic variables possessed greater predictive power. This suggests that macroeconomic variables do have explanatory power for default credit risk. Practical/managerial implications: The originality in the study was that three models were developed to predict corporate firms’ defaults based on different microeconomic and macroeconomic factors such as the TCRI, asset growth rates, stock index and gross domestic product. Contribution/value-add: The study utilises different goodness of fits and receiver operator characteristics during the examination of the robustness of the predictive power of these factors.

  9. Managing sovereign credit risk in bond portfolios

    OpenAIRE

    Bruder, Benjamin; Hereil, Pierre; Roncalli, Thierry

    2011-01-01

    With the recent development of the European debt crisis, traditional index bond management has been severely called into question. We focus here on the risk issues raised by the classical market-capitalization weighting scheme. We propose an approach to properly measure sovereign credit risk in a fixed-income portfolio. For that, we assume that CDS spreads follow a SABR process and we derive a sovereign credit risk measure based on CDS spreads and duration of portfolio bonds. We then consider...

  10. Credit Default Swap Valuation with Counterparty Risk

    OpenAIRE

    Leung, Seng Yuen; Kwok, Yue Kuen

    2005-01-01

    Using the reduced form framework with inter-dependent default correlation, we perform valuation of credit default swap with counterparty risk. The inter-dependent default risk structure between the protection buyer, protection seller and the reference entity in a credit default swap are characterized by their correlated default intensities, where the default intensity of one party increases when the default of another party occurs. We explore how settlement risk and replacement cost affect th...

  11. Wholesale funding, coordination, and credit risk

    OpenAIRE

    Zhang, Lei; Zhang , Lin; Zheng, Yong

    2013-01-01

    We use the global games approach to study key factors affecting the credit risk\\ud associated with roll-over of bank debt. When creditors are heterogenous, these include\\ud the extent of short-term borrowing and capital market liquidity for repo financing.\\ud Specifically, in a model with a large institutional creditor and a continuum of small\\ud creditors independently making their roll-over decisions based on private information,\\ud we find that increasing the proportion of short-term debt and/...

  12. 12 CFR 704.6 - Credit risk management.

    Science.gov (United States)

    2010-01-01

    ... 12 Banks and Banking 6 2010-01-01 2010-01-01 false Credit risk management. 704.6 Section 704.6... CREDIT UNIONS § 704.6 Credit risk management. (a) Policies. A corporate credit union must operate according to a credit risk management policy that is commensurate with the investment risks and activities...

  13. Credit risk in emerging markets Peruvian listed company

    Directory of Open Access Journals (Sweden)

    Kurt Burneo Farfan

    2017-07-01

    Full Text Available The aim of this paper is to introduce the importance of the banking credit risk, the main elements that conform it and the main alternatives that are offered to access to a loan as well as a description of its measurement and management in the sector. There will be a general explanation of credit risk and the main parties involved in it. As the topic is developed it is going to be analyzed the lending process carried out by the banks as well as the quantitative and qualitative elements taken into account when taking a credit decision (The 5C’s of credit, credit scoring and models for quantification of losses for instance. Another thing to considerate is that Credit risk arises whenever a borrower is expecting to use future cash flows to pay a current debt. Also, the investors have the access for the information of a client and they are compensated for assuming credit risk by way of interest payments from the borrower or issuer of a debt obligation and the credit risk is a useful tool for the finance management. The Enterprise risk management in Peru changed in 2015 because the local regulator is in process to review the norm, including some aspects of corporate governance; these changes are not included in this research.

  14. Effects of economic interactions on credit risk

    International Nuclear Information System (INIS)

    Hatchett, J P L; Kuehn, R

    2006-01-01

    We study a credit-risk model which captures effects of economic interactions on a firm's default probability. Economic interactions are represented as a functionally defined graph, and the existence of both cooperative and competitive business relations is taken into account. We provide an analytic solution of the model in a limit where the number of business relations of each company is large, but the overall fraction of the economy with which a given company interacts may be small. While the effects of economic interactions are relatively weak in typical (most probable) scenarios, they are pronounced in situations of economic stress, and thus lead to a substantial fattening of the tails of loss distributions in large loan portfolios. This manifests itself in a pronounced enhancement of the value at risk computed for interacting economies in comparison with their non-interacting counterparts

  15. Modelling of and empirical studies on portfolio choice, option pricing, and credit risk

    NARCIS (Netherlands)

    Polbennikov, S.Y.

    2005-01-01

    This thesis develops and applies a statistical spanning test for mean-coherent regular risk portfolios. Similarly in spirt to Huberman and Kandel (1987), this test can be implemented by means of a simple semi-parametric instrumental variable regression, where instruments have a direct link with a

  16. Modeling a Distribution of Mortgage Credit Losses

    Czech Academy of Sciences Publication Activity Database

    Gapko, Petr; Šmíd, Martin

    2012-01-01

    Roč. 60, č. 10 (2012), s. 1005-1023 ISSN 0013-3035 R&D Projects: GA ČR GD402/09/H045; GA ČR(CZ) GBP402/12/G097 Grant - others:Univerzita Karlova(CZ) 46108 Institutional research plan: CEZ:AV0Z10750506 Institutional support: RVO:67985556 Keywords : credit risk * mortgage * delinquency rate * generalized hyperbolic distribution * normal distribution Subject RIV: AH - Economics Impact factor: 0.194, year: 2012 http://library.utia.cas.cz/separaty/2013/E/smid-modeling a distribution of mortgage credit losses.pdf

  17. Modeling a Distribution of Mortgage Credit Losses

    Czech Academy of Sciences Publication Activity Database

    Gapko, Petr; Šmíd, Martin

    2010-01-01

    Roč. 23, č. 23 (2010), s. 1-23 R&D Projects: GA ČR GA402/09/0965; GA ČR GD402/09/H045 Grant - others:Univerzita Karlova - GAUK(CZ) 46108 Institutional research plan: CEZ:AV0Z10750506 Keywords : Credit Risk * Mortgage * Delinquency Rate * Generalized Hyperbolic Distribution * Normal Distribution Subject RIV: AH - Economics http://library.utia.cas.cz/separaty/2010/E/gapko-modeling a distribution of mortgage credit losses-ies wp.pdf

  18. Network topology and interbank credit risk

    International Nuclear Information System (INIS)

    González-Avella, Juan Carlos; Hoffmann de Quadros, Vanessa; Iglesias, José Roberto

    2016-01-01

    Modern financial systems are greatly entangled. They exhibit a complex interdependence, including a network of bilateral exposures in the interbank market. The most frequent interaction consists in operations where institutions with surplus liquidity lend to those with a liquidity shortage. These loans may be interpreted as links between the banks and the links display features in some way representative of scale-free networks. While the interbank market is responsible for efficient liquidity allocation, it also introduces the possibility for systemic risk via financial contagion. Insolvency of one bank can propagate through links leading to insolvency of other banks. In this paper, we explore the characteristics of financial contagion in interbank networks whose distribution of links approaches a power law, as well as we improve previous models by introducing a simple mechanism to describe banks’ balance sheets, that are obtained from information on network connectivity. By varying the parameters for the creation of the network, several interbank networks are built, in which the concentration of debt and credit comes from the distribution of links. The results suggest that more connected networks that have a high concentration of credit are more resilient to contagion than other types of networks analyzed.

  19. Credit risk evaluation based on social media.

    Science.gov (United States)

    Yang, Yang; Gu, Jing; Zhou, Zongfang

    2016-07-01

    Social media has been playing an increasingly important role in the sharing of individuals' opinions on many financial issues, including credit risk in investment decisions. This paper analyzes whether these opinions, which are transmitted through social media, can accurately predict enterprises' future credit risk. We consider financial statements oriented evaluation results based on logit and probit approaches as the benchmarks. We then conduct textual analysis to retrieve both posts and their corresponding commentaries published on two of the most popular social media platforms for financial investors in China. Professional advice from financial analysts is also investigated in this paper. We surprisingly find that the opinions extracted from both posts and commentaries surpass opinions of analysts in terms of credit risk prediction. Copyright © 2015 Elsevier Inc. All rights reserved.

  20. The Cross-Section of Credit Risk Premia and Equity Returns

    DEFF Research Database (Denmark)

    Friewald, Nils; Wagner, Christian; Zechner, Josef

    Structural models a la Merton (1974) imply that rms' risk premia in equity and credit markets are related. We explore this relation, using the joint crosssection of stock returns and risk premia estimated from forward credit default swap (CDS) spreads. Consistent with structural models, we nd...... that rms' equity returns and Sharpe ratios increase with estimated credit risk premia and that the returns of buying high and selling low credit risk premium rms cannot be explained by traditional risk factors. Credit risk premia contain equity-relevant information neither captured by risk-neutral nor...

  1. Asset correlations and credit portfolio risk: an empirical analysis

    OpenAIRE

    Düllmann, Klaus; Scheicher, Martin; Schmieder, Christian

    2007-01-01

    In credit risk modelling, the correlation of unobservable asset returns is a crucial component for the measurement of portfolio risk. In this paper, we estimate asset correlations from monthly time series of Moody's KMV asset values for around 2,000 European firms from 1996 to 2004. We compare correlation and value-atrisk (VaR) estimates in a one-factor or market model and a multi-factor or sector model. Our main finding is a complex interaction of credit risk correlations and default probabi...

  2. Credit risk management in banks from the perspective of jurisprudence

    Directory of Open Access Journals (Sweden)

    Sovilj Ranko

    2017-01-01

    Full Text Available The level, structure and nature of problem loans are a significant source of credit risk in the banking business, with the main reason for developing and increasing problem loans indicate the need for a comprehensive and strategic approach to solving them. In addition, the accumulation of problem loans in banks' balance sheets negatively affects the credit activity of banks and, consequently has a negative impact on economic activity, primarily due to reduced availability of possible sources of financing both for companies and for the population. One of the main reasons for the increased credit risk exposure of banks, especially before the outbreak of the subprime crisis, are less developed models for evaluation and measurement of credit risk, as well as a poor assessment of collateral. Therefore, this paper points out to the importance of careful management of credit risk as well as the need to develop appropriate methods and models for the early detection of problem loans and reducing exposure to credit risk. In the last part of the paper, the author provides an overview of the most important collaterals, with specific reference to domestic jurisprudence.

  3. 25 CFR 140.23 - Credit at trader's risk.

    Science.gov (United States)

    2010-04-01

    ... 25 Indians 1 2010-04-01 2010-04-01 false Credit at trader's risk. 140.23 Section 140.23 Indians....23 Credit at trader's risk. Credit given Indians will be at the trader's own risk, as no assistance... accept pawns or pledges of personal property by Indians to obtain credit or loans. ...

  4. 12 CFR 702.108 - Risk mitigation credit.

    Science.gov (United States)

    2010-01-01

    ... 12 Banks and Banking 6 2010-01-01 2010-01-01 false Risk mitigation credit. 702.108 Section 702.108... CORRECTIVE ACTION Net Worth Classification § 702.108 Risk mitigation credit. (a) Who may apply. A credit union may apply for a risk mitigation credit if on any of the current or three preceding effective dates...

  5. Systematic and Idiosyncratic Default Risk in Synthetic Credit Markets

    DEFF Research Database (Denmark)

    Feldhütter, Peter; Nielsen, Mads Stenbo

    2012-01-01

    We present a new estimation approach that allows us to extract from spreads in synthetic credit markets the contribution of systematic and idiosyncratic default risk to total default risk. Using an extensive dataset of 90,600 credit default swap and collateralized debt obligation (CDO) tranche...... spreads on the North American Investment Grade CDX index, we conduct an empirical analysis of an intensity-based model for correlated defaults. Our results show that systematic default risk is an explosive process with low volatility, while idiosyncratic default risk is more volatile but less explosive...

  6. CREDIT DEFAULT SWAPS IN THE MECHANISM OF REDISTRIBUTION OF CREDIT RISK

    Directory of Open Access Journals (Sweden)

    O. Solodka

    2015-03-01

    Full Text Available In the article the economic nature and the functioning of CDS in terms of efficient redistribution of credit risk. The features of the dynamics of the nominal volume of the world market CDS, the gross market value and net market value of the CDS. Proved that more objective indicators of total credit risk shenerovanoho financial institutions are gross market value of the CDS and the net market value of CDS. We consider the variety and scope of CDS. Studied objectivity CDS valuation depending on the basis for valuation of CDS. In the mechanism of functioning CDS credit event as defined default “subject matter”, the features of conventional and technical default. Noted that a credit event for the use of CDS may also restructuring the company, bankruptcy or downgrade economic entity. In the article the types of CDS, including Basket Default Swap and First-of- Basket-to-Default Swap. We consider the application of CDS, namely hedge the credit risk of the underlying asset, which issued CDS; hedging credit risk of other assets by CDS; speculative trading in CDS. Depending on the particular basis for valuation of CDS, investigated objective valuation based on the value of CDS hedging; valuation CDS, based on the intensity of default; CDS valuation based on credit rating; valuation CDS, based on the value of the company. Proved that hedging through CDS will be effective only for the low correlation between the default of the underlying asset and counterparty default on swaps. It is proved that the accuracy and redutsyrovanyh structural models strongly depends on the “a long history of trading” underlying assets, asset must have a long history of trading, be the subject of in-depth analysis of a wide range of analysts and traders.

  7. Overrated credit risk: three essays on credit risk in turbulent times

    NARCIS (Netherlands)

    Bongaerts, D.G.J.

    2010-01-01

    Credit markets have shown a dramatic development at the start of the 21st century. Increased regulatory pressure on financial institutions has spurred the development of innovative products that allow for transfer of credit risk. These developments lay at the base of the largest financial crisis

  8. Understanding Credit Risk: A Classroom Experiment

    Science.gov (United States)

    Servatka, Maros; Theocharides, George

    2011-01-01

    This classroom experiment introduces students to the notion of credit risk and expected return, by allowing them to trade on comparable corporate bond issues from two types of markets: investment-grade and high-yield markets. Investment-grade issues have a lower probability of default than high-yield issues and thus provide a lower yield.…

  9. ASSESSING THE EFFECTIVENESS OF CREDIT RISK MAN ...

    African Journals Online (AJOL)

    User

    The study was conducted using 20 Micro-firms in Accra which ... Journal of Science and Technology, Vol. ... RESEARCH PAPER ... capital (measured by the borrower's net worth), ... number of firms existing in the market and the ... agers and/or staff of the credit management .... the firm's risk tolerance and the level of profit-.

  10. Portfolio Allocation Subject to Credit Risk

    Directory of Open Access Journals (Sweden)

    Rogerio de Deus Oliveira

    2003-12-01

    Full Text Available Credit Risk is an important dimension to be considered in the risk management procedures of financial institutions. Is a particularly useful in emerging markets where default rates on bank loan products are usually high. It is usually calculated through highly costly Monte Carlo simulations which consider different stochastic factors driving the uncertainly associated to the borrowers liabilities. In this paper, under some restrictions, we drive closed form formulas for the probability distributions of default rates of bank loans products involving a big number of clients. This allows us to quickly obtain the credit risk of such products. Moreover, using these probability distributions, we solve the problem of optimal portfolio allocation under default risk.

  11. Internal controls and credit risk relationship among banks in Europe

    Directory of Open Access Journals (Sweden)

    Ellis Kofi Akwaa-Sekyi

    2017-01-01

    Full Text Available Purpose: The study purport to investigate the effectiveness of internal control mechanisms, investigate whether evidence of agency problem is found among banks in Europe and determine how internal controls affect credit risk. Design/methodology/approach: Panel data from 91 banks from 23 European Union countries were studied from 2008-2014. Hausman’s specification test suggest the use of fixed effects estimation technique of GLS. Quantitatively modelled data on 15 variables covering elements of internal controls, objectives of internal controls, agency problem, bank and country specific variables were used. Findings: There is still high credit risk in spite of measures being implemented by the European Central Bank. Banks have individual entity factors that increase or decrease credit risk. The study finds effective internal control systems because objectives of internal controls are achieved and significantly determine credit risk. Agency problem is confirmed due to significant positive relation with credit risk. There is significant effect of internal controls on credit risk with specific variables as risk assessment, return on average risk weighted assets, institutional ownership, bank size, inflation, interest rate and GDP. Research limitations/implications: Missing data prevented the use of strongly balanced panel. The lack of flexibility with using quantitative approach did not allow further scrutiny of the nature of variables. However, statistical tests were acceptable for the model used. The study has implications for management and owners of banks to be warry of agency problem because that provides incentive for reckless high risk transactions that may benefit the agent than the principal. Management must engage in actions that profile the company better and enhances value maximization. Rising default risk has tendency to impair corporate image leading to loss of reputational capital. Originality/value: The study provides the use of

  12. The impact of credit risk assessment on credit activity of commercial banks

    Directory of Open Access Journals (Sweden)

    Ljubić Marijana

    2015-01-01

    Full Text Available As banks have great social responsibility and are a subject to a specific and extensive regulations, one of the being Basel, the authors of this paper focus on the impact of credit risk assessment on credit activity of commercial banks. The authors of this paper provide a standard for risk management and an insight into directions on how to manage credit risk in the most efficient way and how to assess credit rating of a borrower.

  13. Credit Monitoring – a Core of Credit Risk Management: Theory and Experience

    Directory of Open Access Journals (Sweden)

    Daiva Jurevičienė

    2013-11-01

    Full Text Available Purpose of the article: Purpose of the article is to identify credit monitoring as a keystone of credit risk management in banks. CRM is widely discussed in scientific literature and in reports of institutions undertaking credit risk or supervisory bodies. However majority of such investigations are based on implementation of numerous quantitative or qualitative methods used for credit risk assessment before granting a loan or for credit portfolio risk management. There is a lack of information or investigations made on estimation of the need of credit monitoring in credit risk management process. Scientific aim: Scientific aim is to structure the early warning signs that reflect the condition of credits. Methodology/methods: The paper is based on analysis and resumption of various scientific and professional articles related to organization of credit process in banks. It combines results of assessments of credit monitoring importance in credit risk management process made by theoretical studies as well as investigation of experts. Findings: Finding of the article is presentation of credit monitoring tools that should be applied for corporate (and individual clients via modification of original credit agreement. Conclusions: (limits, implications etc Conclusion of the article is that credit monitoring is a keystone in credit risk management process. The purpose of credit monitoring is to detect in time possible worsening of the loan and to react (make changes in loan agreement. The simplest tool for credit monitoring is to identify early warning signs in time that could be assorted into four groups: EWS of business environment; EWS with regard to management, EWS regarding collateral, EWS in financial analysis. Limitation of investigation is impossibility of evaluation of importance of monitoring process in practice except investigation of experts (employees directly responsible for credit business.

  14. Credit securitization and credit derivatives: Financial instruments and the credit risk management of middle market commercial loan portfolios

    OpenAIRE

    Henke, Sabine; Burghof, Hans-Peter; Rudolph, Bernd

    1998-01-01

    Banks increasingly recognize the need to measure and manage the credit risk of their loans on a portfolio basis. We address the subportfolio "middle market". Due to their specific lending policy for this market segment it is an important task for banks to systematically identify regional and industrial credit concentrations and reduce the detected concentrations through diversification. In recent years, the development of markets for credit securitization and credit derivatives has provided n...

  15. Prepayment risk, impact on credit products

    Directory of Open Access Journals (Sweden)

    Dan Costin NIŢESCU

    2012-08-01

    Full Text Available Credit pricing is always an important aspect of operations of banks, as loans are generally two thirds of bank assets. Therefore, the study of factors influencing a bank customer behavior and their impact on early repayment of loans may have a significant influence in reducing the risk assumed by such unexpected operations.Objective analysis of prepayment risk is to estimate the probability of repayment to better manage its manifestation. The existence of potential customers that use this option exposes the bank to a number of risks, such as interest rate risk, the maturity mismatch risk and liquidity risk.Proper evaluation and forecasting the evolution of this risk can bring great benefits for a credit institution in the management of loan products and customer relationship: lower risk of over-ensure against fixed rate mortgage, a better management of short-term and long term liquidity needs (thus reducing the risk of over-financing can offer customers more competitive pricing (achieved by reducing funding costs due to better assessment and management of risks involved early repayment.

  16. Credit Risk Management - Loan Approval Process

    Directory of Open Access Journals (Sweden)

    Lulzim Rashiti

    2016-03-01

    Full Text Available The aim of this study is on understanding the international regulations issued by Basel I, Basel II and Basel III to best supervise and manage credit risk management policies. Part of paper will focus on the description and impacts of the regulations and the pivotal importance they play in providing a sound banking system. Credit risk represents another important element that will be analysed considering that it lays the foundation during the loan consideration and approval process. The paper will also explain in detail procedures and responsibilities shared along the process of loan acceptance by a banker. To sum up, the overall process from application to loan approval or denial will be explained pointing out the implications that are faced along the way

  17. Customers and Markets: Both are Essential to Credit-Risk Measurement

    Directory of Open Access Journals (Sweden)

    David E. Allen

    2011-03-01

    Full Text Available This paper compares credit models that incorporate a market component to those that are solely customerbased. We found that customer-only models understated credit risk during the Global Financial Crisis (GFCand do not adequately differentiate between industries. Models that focus too heavily on the market canoverstate credit risk in times of high volatility. We recommend a two-factor modelling approach thatincorporates both customer and market risk to improve the accuracy of credit-risk measurement as well asassist lenders with early risk detection.

  18. 49 CFR 260.17 - Credit risk premium analysis.

    Science.gov (United States)

    2010-10-01

    ... 49 Transportation 4 2010-10-01 2010-10-01 false Credit risk premium analysis. 260.17 Section 260... Financial Assistance § 260.17 Credit risk premium analysis. (a) When Federal appropriations are not available to cover the total subsidy cost, the Administrator will determine the Credit Risk Premium...

  19. 12 CFR 932.4 - Credit risk capital requirement.

    Science.gov (United States)

    2010-01-01

    ... 12 Banks and Banking 7 2010-01-01 2010-01-01 false Credit risk capital requirement. 932.4 Section... CAPITAL STANDARDS FEDERAL HOME LOAN BANK CAPITAL REQUIREMENTS § 932.4 Credit risk capital requirement. (a) General requirement. Each Bank's credit risk capital requirement shall be equal to the sum of the Bank's...

  20. 49 CFR 260.15 - Credit risk premium.

    Science.gov (United States)

    2010-10-01

    ... 49 Transportation 4 2010-10-01 2010-10-01 false Credit risk premium. 260.15 Section 260.15... REHABILITATION AND IMPROVEMENT FINANCING PROGRAM Overview § 260.15 Credit risk premium. (a) Where available... pay to the Administrator a Credit Risk Premium adequate to cover that portion of the subsidy cost not...

  1. An endogenous model of the credit network

    Science.gov (United States)

    He, Jianmin; Sui, Xin; Li, Shouwei

    2016-01-01

    In this paper, an endogenous credit network model of firm-bank agents is constructed. The model describes the endogenous formation of firm-firm, firm-bank and bank-bank credit relationships. By means of simulations, the model is capable of showing some obvious similarities with empirical evidence found by other scholars: the upper-tail of firm size distribution can be well fitted with a power-law; the bank size distribution can be lognormally distributed with a power-law tail; the bank in-degrees of the interbank credit network as well as the firm-bank credit network fall into two-power-law distributions.

  2. Assessment of credit risk based on fuzzy relations

    Science.gov (United States)

    Tsabadze, Teimuraz

    2017-06-01

    The purpose of this paper is to develop a new approach for an assessment of the credit risk to corporate borrowers. There are different models for borrowers' risk assessment. These models are divided into two groups: statistical and theoretical. When assessing the credit risk for corporate borrowers, statistical model is unacceptable due to the lack of sufficiently large history of defaults. At the same time, we cannot use some theoretical models due to the lack of stock exchange. In those cases, when studying a particular borrower given that statistical base does not exist, the decision-making process is always of expert nature. The paper describes a new approach that may be used in group decision-making. An example of the application of the proposed approach is given.

  3. Credit Default Swaps networks and systemic risk

    Science.gov (United States)

    Puliga, Michelangelo; Caldarelli, Guido; Battiston, Stefano

    2014-11-01

    Credit Default Swaps (CDS) spreads should reflect default risk of the underlying corporate debt. Actually, it has been recognized that CDS spread time series did not anticipate but only followed the increasing risk of default before the financial crisis. In principle, the network of correlations among CDS spread time series could at least display some form of structural change to be used as an early warning of systemic risk. Here we study a set of 176 CDS time series of financial institutions from 2002 to 2011. Networks are constructed in various ways, some of which display structural change at the onset of the credit crisis of 2008, but never before. By taking these networks as a proxy of interdependencies among financial institutions, we run stress-test based on Group DebtRank. Systemic risk before 2008 increases only when incorporating a macroeconomic indicator reflecting the potential losses of financial assets associated with house prices in the US. This approach indicates a promising way to detect systemic instabilities.

  4. Credit Default Swaps networks and systemic risk.

    Science.gov (United States)

    Puliga, Michelangelo; Caldarelli, Guido; Battiston, Stefano

    2014-11-04

    Credit Default Swaps (CDS) spreads should reflect default risk of the underlying corporate debt. Actually, it has been recognized that CDS spread time series did not anticipate but only followed the increasing risk of default before the financial crisis. In principle, the network of correlations among CDS spread time series could at least display some form of structural change to be used as an early warning of systemic risk. Here we study a set of 176 CDS time series of financial institutions from 2002 to 2011. Networks are constructed in various ways, some of which display structural change at the onset of the credit crisis of 2008, but never before. By taking these networks as a proxy of interdependencies among financial institutions, we run stress-test based on Group DebtRank. Systemic risk before 2008 increases only when incorporating a macroeconomic indicator reflecting the potential losses of financial assets associated with house prices in the US. This approach indicates a promising way to detect systemic instabilities.

  5. Use of Modern Methods of Credit Portfolio Risk Management in Commercial Banks of Russian Federation

    Directory of Open Access Journals (Sweden)

    Dmitrii S. Melnyk

    2013-01-01

    Full Text Available The article deals with the structure and factors of credit portfolio risk, analyses existing models of portfolio risk assessment and develops recommendations on the implementation of risk management adapted methods, presents recommendations on the optimization of the approach to credit risk minimization in Russian banking system.

  6. Quantifying Correlation Uncertainty Risk in Credit Derivatives Pricing

    Directory of Open Access Journals (Sweden)

    Colin Turfus

    2018-04-01

    Full Text Available We propose a simple but practical methodology for the quantification of correlation risk in the context of credit derivatives pricing and credit valuation adjustment (CVA, where the correlation between rates and credit is often uncertain or unmodelled. We take the rates model to be Hull–White (normal and the credit model to be Black–Karasinski (lognormal. We summarise recent work furnishing highly accurate analytic pricing formulae for credit default swaps (CDS including with defaultable Libor flows, extending this to the situation where they are capped and/or floored. We also consider the pricing of contingent CDS with an interest rate swap underlying. We derive therefrom explicit expressions showing how the dependence of model prices on the uncertain parameter(s can be captured in analytic formulae that are readily amenable to computation without recourse to Monte Carlo or lattice-based computation. In so doing, we crucially take into account the impact on model calibration of the uncertain (or unmodelled parameters.

  7. Customer classification in banking system of Iran based on the credit risk model using multi-criteria decision-making models

    Directory of Open Access Journals (Sweden)

    Khalil Khalili

    2015-11-01

    Full Text Available One of the most important factors of survival of financial institutes and banks in the current competitive markets is to create balance and equality among resources and consumptions as well as to keep the health of money circulation in these institutes. According to the experiences obtained from recent financial crises in the world. The lack of appropriate management of the demands of banks and financial institutions can be considered as one of the main factors of occurrence of this crisis. The objective of the present study is to identify and classify customers according to credit risk and decisions of predictive models. The present research is a survey research employing field study in terms of the data collection method. The method of collecting theoretical framework was library research and the data were collected by two ways of data of a questionnaire and real customers’ financial data. To analyze the data of the questionnaire, analytical hierarchy process and to analyze real customers’ financial data, the TOPSIS method were employed. The population of the study included files of real customers in one of the branches of RefahKargaran Bank in city of Tabriz, Iran. From among 800 files, 140 files were completed and using Morgan’s table, 103 files were investigated. The final model was presented and with 95% of probability, if the next customer’s data is entered the model, it will capable of identifying accurately the degree of customer risk.

  8. Risk of Credit Cooperatives: An analysis based on the profile of the cooperated

    Directory of Open Access Journals (Sweden)

    José Roberto de Souza Francisco

    2012-12-01

    Full Text Available This work has as purpose to analyze among the credit operations, those that generate larger breach of contract risk for the cooperative, with base in the profile of the cooperated, and to identify which the strategies can be pointed to avoid possible flaws in the next credit analyses. The work was divided in three stages. The first stage refers to the National Financial System, with the objective of demonstrating as in him the Cooperatives of Credit are inserted. The second stage approaches the System of Cooperative Credit, it presents that form is structured and his/her hierarchical level. The third stage treats of the System of Risk of Credit, in the which the risk, administration and the models of credit evaluation will be analyzed. It was verified that the most appropriate models for analysis of the Cooperatives of Credit are Credit Scoring Models and Credit Bureau, us which, through statistical techniques as the analysis discriminante and regression logistics, the characteristics of considered credits of larger breach of contract risk were demonstrated. The analysis based on identifying the "worse customer", because this generates larger breach of contract risk and it influences in the financial administration. It was ended that the most relevant variables to identify the breach of contract risk were the rude monthly income and the value liberated in the credit concession, because the largest concentration of breach of contract risk.

  9. CREDIT RISK MANAGEMENT IN THE COMMERCIAL BANKS IN ROMANIA

    Directory of Open Access Journals (Sweden)

    Mihaela SUDACEVSCHI

    2014-04-01

    Full Text Available Credit risk is one of the main risks faced by a bank. This kind of risk is generated by the crediting activity of the clients. To manage the credit risk, banks should identify the sources of the risk and to monitor their exposures. These activities mean a better knowledge of the existing and potential clients and their financial situations, by implementing new scoring methods. Also, to avoid the credit risk or to reduce losses, the banks could increase the value of guarantees required in regular credit activities, their periodically reassessment and the periodical analysis of the ability of customers to generate cash flows (for corporate clients and get constant income (for retail customers to provide repayment of credits. This paper aims to prevent and to analyze several measures of credit risk management and it assume that banks on the Romanian banking market and to identify some indices used for customers analysis.

  10. IMPLICATIONS OF CREDIT RISK TRANSFER ON BANK PERFORMANCES

    Directory of Open Access Journals (Sweden)

    Victoria COCIUG

    2015-07-01

    Full Text Available The impact of the financial crisis has demonstrated the fragility of the banking sector and the need to implement new technologies that would allow not only insurance against the most important credit risk - credit risk, but development of lending segment. In such conditions, transfer of credit risk is an efficient and actual way to diversify the banks exposure for credit risk by the presence of those who are willing to take on some of this risk. Taking of credit risk can be achieved through credit derivatives, securitization and sale of loans, being selected the most advantageous technique for the bank. The current situation of the national banking sector requires solving the problem of bad loans, which, unfortunately, are increasing, by implementing new techniques for credit risk management according with EU directives.

  11. The Cross-Section of Credit Risk Premia and Equity Returns

    DEFF Research Database (Denmark)

    Friewald, Nils; Wagner, Christian; Zechner, Josef

    2014-01-01

    We explore the link between a firm's stock returns and credit risk using a simple insight from structural models following Merton (1974): risk premia on equity and credit instruments are related because all claims on assets must earn the same compensation per unit of risk. Consistent with theory......, we find that firms' stock returns increase with credit risk premia estimated from CDS spreads. Credit risk premia contain information not captured by physical or risk-neutral default probabilities alone. This sheds new light on the “distress puzzle”—the lack of a positive relation between equity...

  12. The Cross-Section of Credit Risk Premia and Equity Returns

    DEFF Research Database (Denmark)

    Friewald, Niels; Wagner, Christian; Zechner, Josef

    We explore the link between a firm's stock returns and its credit risk using a simple insight from structural models following Merton (1974): risk premia on equity and credit instruments are related because all claims on assets must earn the same compensation per unit of risk. Consistent...... with theory, we find that firms' stock returns increase with credit risk premia estimated from CDS spreads. Credit risk premia contain information not captured by physical or by risk-neutral default probabilities alone. This sheds new light on the "distress puzzle", i.e. the lack of a positive relation...

  13. Credit Risk Evaluation System For Nigerian Banks Using Artificial Ne

    African Journals Online (AJOL)

    MANKABS

    CREDIT RISK EVALUATION SYSTEM: AN ARTIFICIAL NEURAL NETWORK APPROACH of their own experiential .... limitations concern the high computational ... Number of existing credits at this bank. 7. Personal status and sex. 14. Job. 17.

  14. Credit risk identification and suggestions of electricity market

    Science.gov (United States)

    He, Chuan; Wang, Haichao; Chen, Zhongyuan; Hao, Yuxing; Jiang, Hailong; Qian, Hanhan; Wang, Meibao

    2018-03-01

    The power industry has a long history of credit problems, and the power industry has credit problems such as power users defaulting on electricity bills before the new electricity reform. With the reform of the power system, the credit problems in the power industry will be more complicated. How to effectively avoid the risk factors existing in the course of market operation and how to safeguard the fairness and standardization of market operation is an urgent problem to be solved. This paper first describes the credit risk in power market, and analyzes the components of credit risk identification in power market, puts forward suggestions on power market risk management.

  15. Value at risk, bank equity and credit risk

    OpenAIRE

    Broll, Udo; Wahl, Jack E.

    2003-01-01

    We study the implications of the value at risk concept for the bank's optimum amount of equity capital under credit risk. The market value of loans is risky and lognormally distributed. We show that the required equity capital depends upon managerial and market factors. Furthermore, the bank's equity and asset/liability management has to be addressed simultaneously by bank managers.

  16. Determinants of credit risk - the case of Serbia

    Directory of Open Access Journals (Sweden)

    Jović Željko

    2017-01-01

    Full Text Available This paper examines systemic and specific factors that increased the credit risk level in the Serbian banking sector between 2008 and 2014, by applying the vector autoregression model (VAR, logit and probit. Business cycle and RSD depreciation are the most important systemic determinants of credit risk in the corporate sector, while in the retail sector these determinants represent a deterioration of the business and financial situation, based on a rise in the unemployment rate and nonperforming loans, together with domestic currency depreciation and the effects of the solidarity tax. Banks that entered the crisis with a lower level of capital, higher level of portfolio concentration in their 50 biggest borrowers, and with restrictions on the owner supporting the bank by providing additional capital in the period of credit risk increase, have been more exposed to default and more inclined to overestimate their good assets in their reports. The influence of RSD depreciation and the economic interrelation of clients represent an increase in the credit risk level.

  17. Systemic risk contributions: a credit portfolio approach

    OpenAIRE

    Düllmann, Klaus; Puzanova, Natalia

    2011-01-01

    We put forward a Merton-type multi-factor portfolio model for assessing banks' contributions to systemic risk. This model accounts for the major drivers of banks' systemic relevance: size, default risk and correlation of banks' assets as a proxy for interconnectedness. We measure systemic risk in terms of the portfolio expected shortfall (ES). Banks' (marginal) risk contributions are calculated based on partial derivatives of the ES in order to ensure a full risk allocation among institutions...

  18. Liquidity and credit risk in the emerging financial markets

    OpenAIRE

    Amir Saadaoui, Younes Boujelbene

    2014-01-01

    In this paper, we examine the relationship between liquidity, liquidity risk and credit risk in emerging sovereign bonds after the subprime crisis period. In our study, we concentrate in the effect of liquidity and credit risk in the problem of liquidity and in the emerging bond market. The presence of control variables, asymmetric information, amount outstanding, coupon, age and interest rate, assist to more explain this relationship. To explain the role of liquidity and credit risk in the p...

  19. Directions of coordination of financial accounting standards with principles for credit risk management in banks

    OpenAIRE

    Voloshyn, Ihor

    2014-01-01

    This paper examines ways of overcoming inconsistencies between IFRS and modern concepts of credit risk management, namely, expected loss model and risk-adjusted loan pricing. Also, it is considered an issue of acceptable levels of concentration risk in bank credit portfolio.

  20. Geographically Weighted Logistic Regression Applied to Credit Scoring Models

    Directory of Open Access Journals (Sweden)

    Pedro Henrique Melo Albuquerque

    Full Text Available Abstract This study used real data from a Brazilian financial institution on transactions involving Consumer Direct Credit (CDC, granted to clients residing in the Distrito Federal (DF, to construct credit scoring models via Logistic Regression and Geographically Weighted Logistic Regression (GWLR techniques. The aims were: to verify whether the factors that influence credit risk differ according to the borrower’s geographic location; to compare the set of models estimated via GWLR with the global model estimated via Logistic Regression, in terms of predictive power and financial losses for the institution; and to verify the viability of using the GWLR technique to develop credit scoring models. The metrics used to compare the models developed via the two techniques were the AICc informational criterion, the accuracy of the models, the percentage of false positives, the sum of the value of false positive debt, and the expected monetary value of portfolio default compared with the monetary value of defaults observed. The models estimated for each region in the DF were distinct in their variables and coefficients (parameters, with it being concluded that credit risk was influenced differently in each region in the study. The Logistic Regression and GWLR methodologies presented very close results, in terms of predictive power and financial losses for the institution, and the study demonstrated viability in using the GWLR technique to develop credit scoring models for the target population in the study.

  1. Credit scores, cardiovascular disease risk, and human capital.

    Science.gov (United States)

    Israel, Salomon; Caspi, Avshalom; Belsky, Daniel W; Harrington, HonaLee; Hogan, Sean; Houts, Renate; Ramrakha, Sandhya; Sanders, Seth; Poulton, Richie; Moffitt, Terrie E

    2014-12-02

    Credit scores are the most widely used instruments to assess whether or not a person is a financial risk. Credit scoring has been so successful that it has expanded beyond lending and into our everyday lives, even to inform how insurers evaluate our health. The pervasive application of credit scoring has outpaced knowledge about why credit scores are such useful indicators of individual behavior. Here we test if the same factors that lead to poor credit scores also lead to poor health. Following the Dunedin (New Zealand) Longitudinal Study cohort of 1,037 study members, we examined the association between credit scores and cardiovascular disease risk and the underlying factors that account for this association. We find that credit scores are negatively correlated with cardiovascular disease risk. Variation in household income was not sufficient to account for this association. Rather, individual differences in human capital factors—educational attainment, cognitive ability, and self-control—predicted both credit scores and cardiovascular disease risk and accounted for ∼45% of the correlation between credit scores and cardiovascular disease risk. Tracing human capital factors back to their childhood antecedents revealed that the characteristic attitudes, behaviors, and competencies children develop in their first decade of life account for a significant portion (∼22%) of the link between credit scores and cardiovascular disease risk at midlife. We discuss the implications of these findings for policy debates about data privacy, financial literacy, and early childhood interventions.

  2. Companies Credit Risk Assessment Methods for Investment Decision Making

    Directory of Open Access Journals (Sweden)

    Dovilė Peškauskaitė

    2017-06-01

    Full Text Available As the banks have tightened lending requirements, companies look for alternative sources of external funding. One of such is bonds issue. Unfortunately, corporate bonds issue as a source of funding is rare in Lithuania. This occurs because companies face with a lack of information, investors fear to take on credit risk. Credit risk is defined as a borrower’s failure to meet its obligation. Investors, in order to avoid credit risk, have to assess the state of the companies. The goal of the article is to determine the most informative methods of credit risk assessment. The article summarizes corporate lending sources, analyzes corporate default causes and credit risk assessment methods. The study based on the SWOT analysis shows that investors before making an investment decision should evaluate both the business risk,using qualitative method CAMPARI, and the financial risk, using financial ratio analysis.

  3. Credit risk in liberalised power and natural gas markets

    International Nuclear Information System (INIS)

    Lapson, E.; Hunter, Richard

    1999-01-01

    This chapter examines the relationship of market structure and price volatility to credit risk, and discusses credit risk and energy market structures, credit risk in bilateral contracts, market evolution, and the effect of liberalising power markets on credit quality considering the power liberalising in Europe, the pace of change, and the new risks and opportunities. The market structure in Europe is addressed, and the EU Directive 96/92/EC, structural requirements, access for new generation capacity, and transmission costs are considered. Details of the liberalisation in the UK electricity market, the German market, and the Nord Pool are given, and the best credit practices in bilateral markets, and the quantifying of expected credit loss are described. Panels highlighting the need to know your counterparty in evaluating and negotiating bilateral contracts, and lessons learnt from the June 1998 US power price spike are presented

  4. Sovereign Credit Risk, Liquidity, and European Central Bank Intervention

    DEFF Research Database (Denmark)

    Pelizzon, Loriana; Subrahmanyam, Marti G.; Tomio, Davide

    2016-01-01

    We examine the dynamic relation between credit risk and liquidity in the Italian sovereign bond market during the eurozone crisis and the subsequent European Central Bank (ECB) interventions. Credit risk drives the liquidity of the market. A 10% change in the credit default swap (CDS) spread leads...... to a 13% change in the bid-ask spread, the relation being stronger when the CDS spread exceeds 500 basis points. The Long-Term Refinancing Operations of the ECB weakened the sensitivity of market makers’ liquidity provision to credit risk, highlighting the importance of funding liquidity measures...

  5. Some Considerations on the Partial Credit Model

    Science.gov (United States)

    Verhelst, N. D.; Verstralen, H. H. F. M.

    2008-01-01

    The Partial Credit Model (PCM) is sometimes interpreted as a model for stepwise solution of polytomously scored items, where the item parameters are interpreted as difficulties of the steps. It is argued that this interpretation is not justified. A model for stepwise solution is discussed. It is shown that the PCM is suited to model sums of binary…

  6. Credit Risk Evaluation of Large Power Consumers Considering Power Market Transaction

    Science.gov (United States)

    Fulin, Li; Erfeng, Xu; ke, Sun; Dunnan, Liu; Shuyi, Shen

    2018-03-01

    Large power users will participate in power market in various forms after power system reform. Meanwhile, great importance has always attached to the construction of the credit system in power industry. Due to the difference between the awareness of performance and the ability to perform, credit risk of power customer will emerge accordingly. Therefore, it is critical to evaluate credit risk of large power customers in the new situation of power market. Firstly, this paper constructs index system of credit risk of large power customers, and establishes evaluation model of interval number and AHP-entropy weight method.

  7. Sovereign Credit Risk in Latin America and Global Common Factors

    OpenAIRE

    Manuel Agosin Trumper; Juan Díaz Maureira

    2012-01-01

    This paper studies the importance of global common factors in the evolution of sovereign credit risk in a group of emerging economies (15 countries in Latin America for which daily data are available on sovereign credit spreads and CDS quotations from the beginning of 2007 until February 2012). We arrive at three principal results. First, there is robust evidence for the existence of a common factor in the evolution of the two measurements of sovereign credit risk that we use. Second, the com...

  8. 12 CFR 567.6 - Risk-based capital credit risk-weight categories.

    Science.gov (United States)

    2010-01-01

    ... 12 Banks and Banking 5 2010-01-01 2010-01-01 false Risk-based capital credit risk-weight... CAPITAL Regulatory Capital Requirements § 567.6 Risk-based capital credit risk-weight categories. (a) Risk...)(2) of this section), plus risk-weighted recourse obligations, direct credit substitutes, and certain...

  9. Credit Risk Evaluation System: An Artificial Neural Network Approach

    African Journals Online (AJOL)

    On the other hand, this kind of bank's activity is connected with high risk as big amount of bad decisions may even cause bankruptcy. The key problem consists of distinguishing good (that surely repay) and bad (that likely default) credit applicants. Credit risk evaluation is an important and interesting management science ...

  10. The evolution of credit risk: phenomena, methods and management

    OpenAIRE

    George A. Christodoulakis

    2007-01-01

    This paper summarizes the proceedings of a conference at the Bank of Greece on credit risk. The papers presented focused on innovations in risk management methods which contribute to systemic financial stability, calculation of capital adequacy in financial institutions as well as the validation of credit rating methods in the context of Basel II.

  11. Agent-based mapping of credit risk for sustainable microfinance.

    Directory of Open Access Journals (Sweden)

    Joung-Hun Lee

    Full Text Available By drawing analogies with independent research areas, we propose an unorthodox framework for mapping microfinance credit risk--a major obstacle to the sustainability of lenders outreaching to the poor. Specifically, using the elements of network theory, we constructed an agent-based model that obeys the stylized rules of microfinance industry. We found that in a deteriorating economic environment confounded with adverse selection, a form of latent moral hazard may cause a regime shift from a high to a low loan payment probability. An after-the-fact recovery, when possible, required the economic environment to improve beyond that which led to the shift in the first place. These findings suggest a small set of measurable quantities for mapping microfinance credit risk and, consequently, for balancing the requirements to reasonably price loans and to operate on a fully self-financed basis. We illustrate how the proposed mapping works using a 10-year monthly data set from one of the best-known microfinance representatives, Grameen Bank in Bangladesh. Finally, we discuss an entirely new perspective for managing microfinance credit risk based on enticing spontaneous cooperation by building social capital.

  12. Agent-based mapping of credit risk for sustainable microfinance.

    Science.gov (United States)

    Lee, Joung-Hun; Jusup, Marko; Podobnik, Boris; Iwasa, Yoh

    2015-01-01

    By drawing analogies with independent research areas, we propose an unorthodox framework for mapping microfinance credit risk--a major obstacle to the sustainability of lenders outreaching to the poor. Specifically, using the elements of network theory, we constructed an agent-based model that obeys the stylized rules of microfinance industry. We found that in a deteriorating economic environment confounded with adverse selection, a form of latent moral hazard may cause a regime shift from a high to a low loan payment probability. An after-the-fact recovery, when possible, required the economic environment to improve beyond that which led to the shift in the first place. These findings suggest a small set of measurable quantities for mapping microfinance credit risk and, consequently, for balancing the requirements to reasonably price loans and to operate on a fully self-financed basis. We illustrate how the proposed mapping works using a 10-year monthly data set from one of the best-known microfinance representatives, Grameen Bank in Bangladesh. Finally, we discuss an entirely new perspective for managing microfinance credit risk based on enticing spontaneous cooperation by building social capital.

  13. Pricing Chinese Convertible Bonds with Dynamic Credit Risk

    Directory of Open Access Journals (Sweden)

    Ping Li

    2014-01-01

    Full Text Available To price convertible bonds more precisely, least squares Monte Carlo (LSM method is used in this paper for its advantage in handling the dependence of derivatives on the path, and dynamic credit risk is used to replace the fixed one to make the value of convertible bonds reflect the real credit risk. In the empirical study, we price convertible bonds based on static credit risk and dynamic credit risk, respectively. Empirical results indicate that the ICBC convertible bond has been overpriced, resulting from the underestimation of credit risk. In addition, when there is an issue of dividend, the conversion price will change in China's convertible bonds, while it does not change in the international convertible bonds. So we also empirically study the difference between the convertible bond's prices by assuming whether the conversion price changes or not.

  14. AVOIDING RISK IN WORKING CAPITAL CREDIT DISTRIBUTION IN INDONESIA

    Directory of Open Access Journals (Sweden)

    Aloysius Deno Hervino

    2011-09-01

    Full Text Available This research analyzes risk avoidance behaviour of banking institutions in distributing working capital loan in Indonesia. Using Autoregressive Distributed Lag Error Correction Model, this paper uncovers three findings. First, in the short run, risk avoidance in working capital loan distribution depends on inter-call banking money market and Sertifikat Bank Indonesia. Second, following banking regulation after 1997 crisis, banks have become more careful in distributing credits, with SBI as a substitution instrument and inter-call banking money market as a complement instrument to spread the risk. Third, all explanatory variables take an average of 6 days or 1 week to influence bank’s risk avoidance behaviour.Keywords:     Risk avoidance, working capital distribution, banking institutions JEL classification numbers: C32, C52, D81, E51

  15. Closed-form pricing formula for exchange option with credit risk

    International Nuclear Information System (INIS)

    Kim, Geonwoo; Koo, Eunho

    2016-01-01

    In this paper, we study the valuation of Exchange option with credit risk. Since the over-the-counter (OTC) markets have grown rapidly in size, the counterparty default risk is very important and should be considered for the valuation of options. For modeling of credit risk, we use the structural model of Klein [13]. We derive the closed-form pricing formula for the price of the Exchange option with credit risk via the Mellin transform and provide the experiment results to illustrate the important properties of option with numerical graphs.

  16. Credit Risk Management and Interest Income of Banks in Nigeria

    Directory of Open Access Journals (Sweden)

    Fapetu, Oladapo

    2017-06-01

    Full Text Available This study examines the impact of credit risk on the interest income of banks in Nigeria between the period of 2000 and 2014. Unbalanced panel data analysis was used to estimate the model with unit root test, Breusch Pagan test, trend analysis, descriptive statistics, Perasan CD Test, heteroskedasticity test, heterogeneity test, serial correlation test, Jarquebera, F-statistics, random effect, fixed effect, time effect, Prob value, Hausman test and rho as the estimation parameters. The study discovered that NPL, LLP and LA are statistically significant in explaining the variation in interest income across banks in Nigeria, while LA/TD is not statistically significant in explaining the variation in interest income across banks in Nigeria. Based on this, the study recommends that regular update of credit policy and adequate measures to monitor loans should be put in place by banks in Nigeria, as these measures will reduce bad loans and ultimately cause a reduction in loan loss provisions.

  17. Modelo de classificação de risco de crédito de empresas A model for the classification of companies credit risk

    Directory of Open Access Journals (Sweden)

    Giovani Antonio Silva Brito

    2008-04-01

    Full Text Available O processo de gerenciamento de risco de crédito em instituições financeiras vem passando por uma revisão ao longo dos últimos anos. Nesse contexto, diversas novas técnicas de mensuração de risco de crédito e tomadores têm sido desenvolvidas e implementadas por grandes Bancos. O objetivo desta pesquisa é desenvolver um modelo de classificação de risco para avaliar o risco de crédito de empresas no mercado brasileiro. O modelo foi construído com base em uma amostra de empresas de capital aberto classificadas como solventes ou insolventes no período entre 1994 e 2004. A técnica estatística utilizada no desenvolvimento do modelo foi a regressão logística. As variáveis independentes são índices financeiros calculados a partir das demonstrações contábeis e utilizados para representar a situação econômico-financeira das empresas. A validação do modelo foi efetuada utilizando o método Jackknife e uma Curva ROC. Os resultados do estudo indicam que o modelo de classificação de risco desenvolvido prevê eventos de default com um ano de antecedência com bom nível de acurácia. Os resultados, também, indicam que as demonstrações contábeis contêm informações que possibilitam a classificação das empresas como prováveis solventes ou prováveis insolventes.The process of credit risk management in financial institutions has been revised in recent years. In this context, large banks have developed and implemented several new techniques for measuring borrowers credit risk. This research aims to develop a risk classification model to assess the credit risk of companies in the Brazilian market. The model was built based on a sample of publicly traded companies classified as solvent or insolvent during the period from 1994 to 2004. Logistic regression was used to develop the model. The independent variables of the model are financial ratios, calculated from the financial statements and used as proxies of companies economic

  18. Testing the generalized partial credit model

    NARCIS (Netherlands)

    Glas, Cornelis A.W.

    1996-01-01

    The partial credit model (PCM) (G.N. Masters, 1982) can be viewed as a generalization of the Rasch model for dichotomous items to the case of polytomous items. In many cases, the PCM is too restrictive to fit the data. Several generalizations of the PCM have been proposed. In this paper, a

  19. Some Considerations on the Partial Credit Model

    OpenAIRE

    H.H.F.M. Verstralen; N.D. Verhelst

    2008-01-01

    The Partial Credit Model (PCM) is sometimes interpreted as a model for stepwise solution of polytomously scored items, where the item parameters are interpreted as di culties of the steps. It is argued that this interpretation is not justi ed. A model for stepwise solution is discussed. It is shown that the PCM is suited to model sums of binary responses which are not supposed to be stochastically independent. As a practical result, a statistical test of sto...

  20. Quantifying credit portfolio losses under multi-factor models

    NARCIS (Netherlands)

    G. Colldeforns-Papiol (Gemma); L. Ortiz Gracia (Luis); C.W. Oosterlee (Kees)

    2018-01-01

    textabstractIn this work, we investigate the challenging problem of estimating credit risk measures of portfolios with exposure concentration under the multi-factor Gaussian and multi-factor t-copula models. It is well-known that Monte Carlo (MC) methods are highly demanding from the computational

  1. Credit Risk Evaluation of Swedish SMEs : A Banking Sector Perspective

    OpenAIRE

    Hörstedt, Maria; Linjamaa, Johanna

    2015-01-01

    As a result from the latest financial crisis, the banking industry has undergone major modifications during the last years in order to limit banks’ risks. A vast majority of existing literature tends to focus upon credit risk evaluation methods and techniques mainly concerning quantitative measures and large companies. Thus, the lack of research regarding credit risk evaluation of SMEs is profound, especially considering Sweden. With the dominant market share of SMEs compared to large corpora...

  2. Response Styles in the Partial Credit Model

    OpenAIRE

    Tutz, Gerhard; Schauberger, Gunther; Berger, Moritz

    2016-01-01

    In the modelling of ordinal responses in psychological measurement and survey- based research, response styles that represent specific answering patterns of respondents are typically ignored. One consequence is that estimates of item parameters can be poor and considerably biased. The focus here is on the modelling of a tendency to extreme or middle categories. An extension of the Partial Credit Model is proposed that explicitly accounts for this specific response style. In contrast to exi...

  3. Exit and Failure of Credit Unions in Brazil: A Risk Analysis

    Directory of Open Access Journals (Sweden)

    Flávio Leonel de Carvalho

    2015-04-01

    Full Text Available This study aims to investigate the factors that affect the market exit of Brazilian singular credit unions from 1995 to 2009; it also identifies and lists the determinants of various types of market exits and analyzes whether profitability is a significant factor for credit union survival. This study was conducted with accounting data provided by the Central Bank of Brazil, which derives only from individual cooperatives, i.e. singular credit unions. Quarterly financial statements from these credit unions that were active from 1995 to the second quarter of 2009 were employed, totaling 71,325 observations for 1,929 credit unions. Based on survival and the model of competing risks (such as the Cox, Exponential, Weibull, Gompertz, and Competing Risk models, the results show that there is no statistical evidence to ensure a correlation between profitability and credit union survival. The results also suggest that the size of credit unions plays a key role in their survival and longevity and that their funding and investment management are related to their survival and risk of market exit. In conclusion, the results confirm the initial idea that the duality inherent to credit unions - cooperative principles versus economic efficiency - might influence the stability, survival, and longevity of these institutions. Such results may also imply that a credit union embracing the rationale of a private bank will become more estranged from its members, something which will hinder its future operations and increase the likelihood of its exit from the market.

  4. Study on the Impact of the Private Credit Excess on the Credit Risk under the Massive Capital Inflows Risk under the Massive Capital Inflows

    Directory of Open Access Journals (Sweden)

    Jong-Hee Kim

    2016-09-01

    Full Text Available By examining the relationship between private credit growth and the possibility of credit risk while focusing on international capital in 21 countries over the period 2000:1Q-2015:2Q, this paper shows that the impact of private credit growth on credit risk is apparent under the high ratio of capital inflows, and its impact on credit risk in the seven Asian countries is even stronger. And the possibility of credit risk caused by private credit is mainly coming from portfolio inflows rather than direct inflows. Finally, portfolio inflows strengthen the positive relationship between credit excess and credit risk in Asian countries, and this trend is seen more in these after the global financial crisis. Taken together, the stronger positive relationship between credit excess and credit risk can be strengthen under the massive portfolio inflows in particular in the seven Asian countries such as Hong Kong, India, Indonesia, Korea, Malaysia, Singapore, and Thailand.

  5. Credit Risk Management. A study on risk integration in the bank lending process.

    NARCIS (Netherlands)

    Sleddens, Linda Elsa Wilhelmina

    2011-01-01

    Credit risk management has been a topic much written about in the last decade. Substantial credit risk losses can undermine the stability of the bank. Both banks and national bank supervisors have realized the need to invest in credit risk management. Partly driven by regulations such as the Basel

  6. Liquidity and Credit Risk in Fixed Income Markets

    OpenAIRE

    Vonhoff, Volker

    2011-01-01

    1 Introduction 2 The Term Structure of Liquidity Premia in the U.S. Treasury Market 3 Liquidity Premia in the Market for German Bunds and STRIPS 4 Liquidity and Credit Risk Premia in the Pfandbrief Market

  7. Data mining for assessing the credit risk of local government units in Croatia

    Directory of Open Access Journals (Sweden)

    Silvija Vlah Jerić

    2017-01-01

    Full Text Available Over the past few decades, data mining techniques, especially artificial neural networks, have been used for modelling many real-world problems. This paper aims to test the performance of three methods: (1 an artificial neural network (ANN, (2 a hybrid artificial neural network and genetic algorithm approach (ANN-GA, and (2 the Tobit regression approach in determining the credit risk of local government units in Croatia. The evaluation of credit risk and prediction of debtor bankruptcy have long been regarded as an important topic in accounting and finance literature. In this research, credit risk is modelled under a regression approach unlike typical credit risk analysis, which is generally viewed as a classification problem. Namely, a standard evaluation of credit risk is not possible due to a lack of bankruptcy data. Thus, the credit risk of a local unit is approximated using the ratio of outstanding liabilities maturing in a given year to total expenditure of the local unit in the same period. The results indicate that the ANN-GA hybrid approach performs significantly better than the Tobit model by providing a significantly smaller average mean squared error. This work is beneficial to researchers and the government in evaluating a local government unit’s credit score.

  8. SUPERVISION OF CREDIT INSTITUTIONS SIGNIFICANT RISKS TO FINANCIAL STABILITY

    Directory of Open Access Journals (Sweden)

    LUCIAN-ION MEDAR

    2014-12-01

    Full Text Available Financial stability of Romanian banking system is determined by the constant supervision of credit institutions significant risks. Accession of Romania to Union Banking requires the signing of a linked protocol between the central bank and European Central Bank regarding prudential supervision to ensure financial stability. This means that from the next year, the central bank will impose a new supervision of credit institutions in our country. And especially to those credit institutions that do not fall under European supervisors, according to the procedures of the ECB. Through this study we propose to specify the main elements of management of significant risks to ensure financial stability.

  9. The impact of ownership structure on bank credit risk: Evidence from Bangladesh

    Directory of Open Access Journals (Sweden)

    Niluthpaul SARKER

    2017-05-01

    Full Text Available This study investigates the impact of ownership structure of Commercial Banks on bank credit risk in an emerging market like Bangladesh. Prais Winten regression model is applied to a sample of 32 commercial banks from the year of 2000 to 2014 with 390 observations. The result reveals that National Commercial Banks, depositors’ influence, shareholders’ influence, liquidity and profitability are negatively associated with credit risk whereas lag risk has a significant positive impact on credit risk. The effect of banks ownership structure on credit risk divulges a delicate governance of the banking sector. The study conveys a momentous implication of research findings in the national economy. It also found that national commercial banks have the tendency of violating the rules and absorbing heavy risk. It suggests that policy maker should rethink about the government ownership of banks. Therefore the denationalization or reducing government ownership structure is highly recommended.

  10. Some Considerations on the Partial Credit Model

    Directory of Open Access Journals (Sweden)

    H.H.F.M. Verstralen

    2008-01-01

    Full Text Available The Partial Credit Model (PCM is sometimes interpreted as a model for stepwise solution of polytomously scored items, where the item parameters are interpreted as di culties of the steps. It is argued that this interpretation is not justi ed. A model for stepwise solution is discussed. It is shown that the PCM is suited to model sums of binary responses which are not supposed to be stochastically independent. As a practical result, a statistical test of stochastic independence in the Rasch model is derived

  11. Credit ratings and CEO risk-taking incentives

    NARCIS (Netherlands)

    Kuang, Y.; Qin, B.

    2013-01-01

    This study examines the sophistication of rating agencies in incorporating managerial risk-taking incentives into their credit risk evaluation. We measure risk-taking incentives using two proxies: the sensitivity of managerial wealth to stock return volatility (vega) and the sensitivity of

  12. Testing the generalized partial credit model

    OpenAIRE

    Glas, Cornelis A.W.

    1996-01-01

    The partial credit model (PCM) (G.N. Masters, 1982) can be viewed as a generalization of the Rasch model for dichotomous items to the case of polytomous items. In many cases, the PCM is too restrictive to fit the data. Several generalizations of the PCM have been proposed. In this paper, a generalization of the PCM (GPCM), a further generalization of the one-parameter logistic model, is discussed. The model is defined and the conditional maximum likelihood procedure for the method is describe...

  13. Leading internal and external sources of credit risk in the top South African banks

    Directory of Open Access Journals (Sweden)

    Tankiso Moloi

    2014-09-01

    Full Text Available This paper aimed at identifying the leading credit risk indicators in the South African banking context as well as the development of an integrated leading credit risk indicator model. A content analysis was used as a data extraction methodology and structural equation modelling was used as a data analysis methodology. The results obtained indicated that utilising the structural equation modelling, gross savings, and prime overdraft rates, number of judgements, business insolvencies and unemployment rates were formulated as leading economic and market (external indicators of credit risk in the South African banking context. Similarly, utilising the principal component analysis, bank asset quality, bank asset concentration as well as bank trading and hedging activities were formulated as leading bank specific (internal indicators of credit risk in the South African banking context. The Integrated Leading Credit Risk Indicator Model (ICRIM was formulated utilising the accepted leading credit risk indicators. The ICRIM parameters were benchmarked against the generally accepted fit indices such as the RMSEA, comparative fit (baseline comparison as well as the Hoelter and its results output were found to be consistent with these generally accepted fit indices

  14. Credit Risk in the Banking Sector in Kosovo

    Directory of Open Access Journals (Sweden)

    Muhamet Aliu

    2017-05-01

    Full Text Available Loans make up the bulk of a bank’s assets, and thus credit risk is the most significant risk for commercial banks in Kosovo and throughout the world. Despite its complexity, effective management of credit risk is a prerequisite for the success of a bank and the banking system in general. A special role in this aspect is played by the separation of reserves to cover the risk of failure to repay the loan or in cases of nonfulfilment of contractual obligations by the loan recipient. Therefore, this research aims to address this issue and analyses the credit risk management of the banking system of the Republic of Kosovo in general and the effects of separation of reserves for loan losses in particular.

  15. Confidence sets for asset correlations in portfolio credit risk

    Directory of Open Access Journals (Sweden)

    Carlos Castro

    2012-06-01

    Full Text Available Asset correlations are of critical importance in quantifying portfolio credit risk and economic capitalin financial institutions. Estimation of asset correlation with rating transition data has focusedon the point estimation of the correlation without giving any consideration to the uncertaintyaround these point estimates. In this article we use Bayesian methods to estimate a dynamicfactor model for default risk using rating data (McNeil et al., 2005; McNeil and Wendin, 2007.Bayesian methods allow us to formally incorporate human judgement in the estimation of assetcorrelation, through the prior distribution and fully characterize a confidence set for the correlations.Results indicate: i a two factor model rather than the one factor model, as proposed bythe Basel II framework, better represents the historical default data. ii importance of unobservedfactors in this type of models is reinforced and point out that the levels of the implied asset correlationscritically depend on the latent state variable used to capture the dynamics of default,as well as other assumptions on the statistical model. iii the posterior distributions of the assetcorrelations show that the Basel recommended bounds, for this parameter, undermine the levelof systemic risk.

  16. Clinical risk and depression (continuing education credit).

    Science.gov (United States)

    Sharkey, S

    1997-01-22

    This article provides information and guidance to nurses on clinical risks in mental health, particularly that of depression. It relates to UKCC professional development category: Reducing risk and Care enhancement.

  17. Construction and Application Research of Isomap-RVM Credit Assessment Model

    Directory of Open Access Journals (Sweden)

    Guangrong Tong

    2015-01-01

    Full Text Available Credit assessment is the basis and premise of credit risk management systems. Accurate and scientific credit assessment is of great significance to the operational decisions of shareholders, corporate creditors, and management. Building a good and reliable credit assessment model is key to credit assessment. Traditional credit assessment models are constructed using the support vector machine (SVM combined with certain traditional dimensionality reduction algorithms. When constructing such a model, the dimensionality reduction algorithms are first applied to reduce the dimensions of the samples, so as to prevent the correlation of the samples’ characteristic index from being too high. Then, machine learning of the samples will be conducted using the SVM, in order to carry out classification assessment. To further improve the accuracy of credit assessment methods, this paper has introduced more cutting-edge algorithms, applied isometric feature mapping (Isomap for dimensionality reduction, and used the relevance vector machine (RVM for credit classification. It has constructed an Isomap-RVM model and used it to conduct financial analysis of China's listed companies. The empirical analysis shows that the credit assessment accuracy of the Isomap-RVM model is significantly higher than that of the Isomap-SVM model and slightly higher than that of the PCA-RVM model. It can correctly identify the credit risks of listed companies.

  18. 76 FR 13902 - Fair Credit Reporting Risk-Based Pricing Regulations

    Science.gov (United States)

    2011-03-15

    ... TRADE COMMISSION 16 CFR Parts 640 and 698 RIN R411009 Fair Credit Reporting Risk-Based Pricing... respective risk-based pricing rules to require disclosure of credit scores and information relating to credit scores in risk-based pricing notices if a credit score of the consumer is used in setting the material...

  19. Using non-performing loan ratios as default rates in the estimation of credit losses and macroeconomic credit risk stress testing: A case from Turkey

    Directory of Open Access Journals (Sweden)

    Guray Kucukkocaoglu

    2016-02-01

    Full Text Available In this study, inspired by the Credit Portfolio View approach, we intend to develop an econometric credit risk model to estimate credit loss distributions of Turkish Banking System under baseline and stress macro scenarios, by substituting default rates with non-performing loan (NPL ratios. Since customer number based historical default rates are not available for the whole Turkish banking system’s credit portfolio, we used NPL ratios as dependent variable instead of default rates, a common practice for many countries where historical default rates are not available. Although, there are many problems in using NPL ratios as default rates such as underestimating portfolio losses as a result of totally non-homogeneous total credit portfolios and transferring non-performing loans to asset management companies from banks’ balance sheets, our aim is to underline and limit some ignored problems using accounting based NPL ratios as default rates in macroeconomic credit risk modeling. Developed models confirm the strong statistical relationship between systematic component of credit risk and macroeconomic variables in Turkey. Stress test results also are compatible with the past experiences

  20. Credit Risk Evaluation of Power Market Players with Random Forest

    Science.gov (United States)

    Umezawa, Yasushi; Mori, Hiroyuki

    A new method is proposed for credit risk evaluation in a power market. The credit risk evaluation is to measure the bankruptcy risk of the company. The power system liberalization results in new environment that puts emphasis on the profit maximization and the risk minimization. There is a high probability that the electricity transaction causes a risk between companies. So, power market players are concerned with the risk minimization. As a management strategy, a risk index is requested to evaluate the worth of the business partner. This paper proposes a new method for evaluating the credit risk with Random Forest (RF) that makes ensemble learning for the decision tree. RF is one of efficient data mining technique in clustering data and extracting relationship between input and output data. In addition, the method of generating pseudo-measurements is proposed to improve the performance of RF. The proposed method is successfully applied to real financial data of energy utilities in the power market. A comparison is made between the proposed and the conventional methods.

  1. Credit risk exposure with interest and currency swaps

    NARCIS (Netherlands)

    Coppes, R.C.; Stokking, E.J.

    1996-01-01

    The increased use of financial derivatives like interest rate and currency swap contracts has drawn much attention, as it exposes banks to non-performance by their counterparts. This credit risk exposure is of great concern to monetary authorities, e.g. the Bank for International Settlements. Ln

  2. Management control of credit risk in the bank lending process

    NARCIS (Netherlands)

    Scheffer, S.B.

    2004-01-01

    Management control of credit risk in the bank lending processA casestudy to explore improvements from a managerial perspectiveAt the start of this project -back in 1998- new technologies and ideas were emerging among a new generation of financial engineering professionals who have been applying

  3. Sample-path large deviations in credit risk

    NARCIS (Netherlands)

    Leijdekker, V.J.G.; Mandjes, M.R.H.; Spreij, P.J.C.

    2011-01-01

    The event of large losses plays an important role in credit risk. As these large losses are typically rare, and portfolios usually consist of a large number of positions, large deviation theory is the natural tool to analyze the tail asymptotics of the probabilities involved. We first derive a

  4. THE EFFECT OF CREDIT LINES AND RISKS ON OPERATIONS OF ...

    African Journals Online (AJOL)

    credit risks that had weakened the microfinance sub sector and its ability to achieve ... Institutional structures for the provision of microcredit vary and may be ... Most of these poor people also earn low income and they are .... They lack access to ... are women, poorly trained and playing dual roles of provider and caregiver.

  5. Efficient Computation of Exposure Profiles for Counterparty Credit Risk

    NARCIS (Netherlands)

    de Graaf, C.S.L.; Feng, Q.; Kandhai, D.; Oosterlee, C.W.

    2014-01-01

    Three computational techniques for approximation of counterparty exposure for financial derivatives are presented. The exposure can be used to quantify so-called Credit Valuation Adjustment (CVA) and Potential Future Exposure (PFE), which are of utmost importance for modern risk management in the

  6. Efficient computation of exposure profiles for counterparty credit risk

    NARCIS (Netherlands)

    C.S.L. de Graaf (Kees); Q. Feng (Qian); B.D. Kandhai; C.W. Oosterlee (Cornelis)

    2014-01-01

    htmlabstractThree computational techniques for approximation of counterparty exposure for financial derivatives are presented. The exposure can be used to quantify so-called Credit Valuation Adjustment (CVA) and Potential Future Exposure (PFE), which are of utmost importance for modern risk

  7. Derivative pricing with liquidity risk: Theory and evidence from the credit default swap market

    NARCIS (Netherlands)

    Bongaerts, D.; de Jong, F.; Driessen, J.

    2008-01-01

    We derive a theoretical asset-pricing model for derivative contracts that allows for expected liquidity and liquidity risk, and estimate this model for the market of credit default swaps (CDS). Our model extends the LCAPM of Acharya and Pedersen (2005) to a setting with derivative instruments and

  8. POSSIBILITIES OF IMPROVING THE METHODS AND TECHNIQUES USED IN THE SURVEILLANCE OF CREDIT RISK MANAGEMENT

    Directory of Open Access Journals (Sweden)

    Balogh Peter

    2010-12-01

    Full Text Available Through their daily activities, credit institutions are subject to various risks which could affect both the bank and the whole banking system, national and transnational. The activity field of the banks, marked by volatility, by the internationalization and liberalization of the financial markets, is in a continuous change. The contagion effect, as it has been proved by the spread of the financial crisis effects, determines the surveillance authorities to pay increased attention to the financial risks and implicitly to the systemic risk. In this study, to start with, there shall be presented some aspects regarding the banking rating systems used by the surveillance authorities and then some ways of improving the models of managing credit risk in banks. In the end, there will be demonstrated that the risk profile of the banking institution has a determining role in the management of the credit portfolio.

  9. A multicriteria approach for rating the credit risk of financial institutions

    NARCIS (Netherlands)

    Baourakis, G.; Conisescu, M.; Dijk, van G.; Pardalos, P.M.; Zopounidis, C.

    2009-01-01

    Within the new bank regulatory context, the assessment of the credit risk of financial institutions is an important issue for supervising authorities and investors. This study explores the possibility of a developing risk assessment model for financial institutions using a multicriteria

  10. Credit Card Risk Behavior on College Campuses: Evidence from Brazil

    Directory of Open Access Journals (Sweden)

    Wesley Mendes-da-Silva

    2012-07-01

    Full Text Available College students frequently show they have little skill when it comes to using a credit card in a responsible manner. This article deals with this issue in an emerging market and in a pioneering manner. University students (n = 769 in São Paulo, Brazil’s main financial center, replied to a questionnaire about their credit card use habits. Using Logit models, associations were discovered between personal characteristics and credit card use habits that involve financially risky behavior. The main results were: (a a larger number of credit cards increases the probability of risky behavior; (b students who alleged they knew what interest rates the card administrators were charging were less inclined to engage in risky behavior. The results are of interest to the financial industry, to university managers and to policy makers. This article points to the advisability, indeed necessity, of providing students with information about the use of financial products (notably credit cards bearing in mind the high interest rates which their users are charged. The findings regarding student behavior in the use of credit cards in emerging economies are both significant and relevant. Furthermore, financial literature, while recognizing the importance of the topic, has not significantly examined the phenomenon in emerging economies.

  11. An empirical approach to the credit risk assessment of a microfinance institution in Peru

    Directory of Open Access Journals (Sweden)

    Juan Lara Rubio

    2011-06-01

    Full Text Available The growth of micro-credit along with the excellent conditions to carry out microfinance activity in the economy and financial system of the Republic of Peru are pushing for Microfinance Institutions (IMF increased competition with banks in this segment business. Like in commercial banks, in microfinance questions such as: is this customer profitable?, What is the credit limit that I must accept to his/her application?, What interest rate should I charge to him/ her?, How I can reduce the risk default?, etc., are matters to be assessed properly. We propose a method that could facilitate improvement in customer qualification between failed and not failed. To this end, we propose a methodology that analyzes credit risk in the provision of microcredit through the design of a credit scoring model that we apply to a Development Agency for Small and Micro Enterprise (EDPYME, which is an IMF under the supervision by the Banking and Insurance Superintendency (SBS.

  12. DEVELOPMENT OF A RISK SCREENING METHOD FOR CREDITED OPERATOR ACTIONS

    International Nuclear Information System (INIS)

    HIGGINS, J.C.; O'HARA, J.M.; LEWIS, P.M.; PERSENSKY, J.; BONGARRA, J.

    2002-01-01

    DEVELOPMENT OF A RISK SCREENING METHOD FOR CREDITED OPERATOR ACTIONS. THE U.S. NUCLEAR REGULATORY COMMISSION (NRC) REVIEWS THE HUMAN FACTORS ASPECTS OF PROPOSED LICENSE AMENDMENTS THAT IMPACT HUMAN ACTIONS THAT ARE CREDITED IN A PLANTS SAFETY ANALYSIS. THE STAFF IS COMMITTED TO A GRADED APPROACH TO THESE REVIEWS THAT FOCUS RESOURCES ON THE MOST RISK IMPORTANT CHANGES. THEREFORE, A RISK INFORMED SCREENING METHOD WAS DEVELOPED BASED ON AN ADAPTATION OF EXISTING GUIDANCE FOR RISK INFORMED REGULATION AND HUMAN FACTORS. THE METHOD USES BOTH QUANTITATIVE AND QUALITATIVE INFORMATION TO DIVIDE THE AMENDMENT REQUESTS INTO DIFFERENT LEVELS OF REVIEW. THE METHOD WAS EVALUATED USING A VARIETY OF TESTS. THIS PAPER WILL SUMMARIZE THE DEVELOPMENT OF THE METHODOLOGY AND THE EVALUATIONS THAT WERE PERFORMED TO VERIFY ITS USEFULNESS

  13. Cooperative credit systems: defence of the model

    Directory of Open Access Journals (Sweden)

    Roxana Sánchez Boza

    2015-11-01

    Full Text Available This study analyses the role carried out by saving and credit cooperatives in Central America where they have gained momentum, mainly in the past ten years. Cooperatives of this type are called financial intermediation cooperatives due to the influence of various legislative regulations that have placed them in the context of international control, the type of economic activity they perform and the fact that they make profits from both public and private international entities which enable their growth.Many of these organisations can be commended. They are highly competitive on financial markets and strive to extend their profits to increasingly larger parts of the population while also searching for new products to benefit the sector of the population that has chosen the cooperative model as a means to progress in a sphere of equity and respect for the rights of their fellow men.Received: 31.05.2015Accepted: 17.07.2015

  14. Fundamental determinants of credit default risk for European and American banks

    Directory of Open Access Journals (Sweden)

    Patrycja Chodnicka-Jaworska

    2017-10-01

    Full Text Available The aim of the paper is to identify the fundamental variables driving banks’ credit default swaps. Quarterly data from 2004 to 2015 for European and American banks have been used. The analysis has been prepared through static panel data models. The following hypothesis has been put forward: the earnings potential, and economic uncertainty significantly influence credit risk. The independent variables used are CAMELS factors – Capital Adequacy, Asset Quality, Management Quality, Earnings Potential, Liquidity, and Sensitivity to Market Risk. The CDS spreads are most sensitive to the market risk factors whereas capital adequacy, earnings and liquidity indicators have weaker impact.

  15. The effect of macroeconomic factors on credit risk in the banking system of Iran

    Directory of Open Access Journals (Sweden)

    Mohammad Khodaei Valahzaghard

    2012-08-01

    Full Text Available These days, there are increasing changes on environmental and economic networks and different risks of various institutions affect the financial structure. Different institutions including financial and credit institutions are facing with the risk of lack of their timely obligations to make sure the repayment of the funds is granted. In this study, the effects of economic factors not affected by intentional behavior of customers are investigated. Statistical study of the banking system includes all public and private banks. Statistical research community from 2005 to 2010 is considered. The cross-sectional data of the study and a combination of regression analysis is used. The regression analysis of combined data, fixed effects model based on the data is a cross-sectional fit. According to results of regression analysis, Pearson and Spearman's Correlation Coefficient, there is no significant relationship between the inflation rate, employment rate, unemployment rate, the dollar, the euro, with import growth of credit risk in the banking system in Iran. Therefore, based on probability theory, it can be stated that the credit risk in the banking system in Iran under the influence of variables is not mentioned. In addition, positive and significant relationship between stock index and credit risk in the banking system in Iran has increased by Weber in this index increases and reducing credit risk is reduced.

  16. PROBLEMS AND OBSTACLES IN CREDIT RISK MANAGEMENT IN INDIAN PUBLIC SECTOR BANKS

    Directory of Open Access Journals (Sweden)

    RENU ARORA

    2014-10-01

    Full Text Available This paper evaluates the credit risk management (CRM practices of Indian public sector banks in grant of commercial loans to find the grey areas which need review and restructuring to improve banks’ asset quality. Based on literature review, a conceptual model of credit risk management systems for commercial loans, of Indian public sector banks, has been developed. This model has been used to underline the problems areas and obstacles in credit risk management through comparison of large and small banks. The empirical comparison of CRM practices of Indian public sector banks has resulted into emergence of various grey areas, like insufficient training, data management, inappropriate IT support, system disintegration, inconsistent rating approaches, which need immediate attention and if tackled properly, can reduce their non-performing assets.

  17. A Generalized Partial Credit Model: Application of an EM Algorithm.

    Science.gov (United States)

    Muraki, Eiji

    1992-01-01

    The partial credit model with a varying slope parameter is developed and called the generalized partial credit model (GPCM). Analysis results for simulated data by this and other polytomous item-response models demonstrate that the rating formulation of the GPCM is adaptable to the analysis of polytomous item responses. (SLD)

  18. A dynamic model of unsecured credit

    OpenAIRE

    Daniel R. Sanches

    2010-01-01

    The author studies the terms of credit in a competitive market in which sellers (lenders) are willing to repeatedly finance the purchases of buyers (borrowers) by engaging in a credit relationship. The key frictions are: (i) the lender is unable to observe the borrower's ability to repay a loan; (ii) the borrower cannot commit to any long-term contract; (iii) it is costly for the lender to contact a borrower and to walk away from a contract; and (iv) transactions within each credit relationsh...

  19. Credit Booms and Busts in Emerging Markets: The Role of Bank Governance and Risk Management

    OpenAIRE

    Brown, Martin; Andries, Alin Marius

    2014-01-01

    This paper investigates to what extent risk management and corporate governance mitigate the involvement of banks in credit boom and bust cycles. Using a unique, hand-collected dataset on 156 banks from Central and Eastern Europe during 2005-2012, we assess whether banks with stronger risk management and corporate governance display more moderate credit growth in the pre-crisis credit boom as well as a smaller credit contraction and fewer credit losses in the crisis period. With respect to ba...

  20. Risk, Credit, and Insurance in Peru: Field Experimental Evidence

    OpenAIRE

    Galarza, Francisco

    2009-01-01

    This paper reports the results of behavioral economic experiments conducted in Peru to examine the relationship amongst risk preferences, loan take-up, and insurance purchase decisions. This area-based yield insurance can help reduce people's vulnerability to large scale covariate shocks, and can also lower the loan default probability under extreme negative covariate shocks. In a context of collateralized formal credit markets, we provide suggestive evidence that insurance may help reduce th...

  1. Analysis of the liquidity risk in credit unions: a logit multinomial approach

    Directory of Open Access Journals (Sweden)

    Rosiane Maria Lima Gonçalves

    2008-10-01

    Full Text Available Liquidity risk in financial institutions is associated to balance between working capital and financial demands. Other factors that affect credit union liquidity are an unanticipated increase of withdrawals without an offsetting amount of new deposits, and the lack of ability in promoting the product geographical diversification. The objective of this study is to analyze Minas Gerais state credit union liquidity risk and its factor determinants. Financial ratios and the multinomial logit model are used. The cooperatives were classified in five categories of liquidity risk: very low, low, medium, high and very high. The empirical results indicate that high levels of liquidity are related to smaller values of the outsourcing capital use, immobilization of the turnover capital, and provision ratios. So, they are associated to larger values of the deposit total/credit operations, and asset growth ratios.

  2. The relationship between liquidity risk and credit risk in Islamic banking industry of Iran

    Directory of Open Access Journals (Sweden)

    Hashem Nikomaram

    2013-04-01

    Full Text Available An integrated risk management is a process, which enables banks to measure and manage all risks, simultaneously. The recent turbulent chaos on banking industry has increase the relative importance of risk management, more than before. This paper investigates the relationship between credit risk and liquidity risk among Iranian banks. The proposed study includes all private and governmental banks as population over the period 2005-2012. The results Pearson correlation has disclosed a positive and meaningful relationship between credit and liquidity risks. Bank size also impacts on two mentioned risk factors but we there seems to be no relationship between financial chaos and type of ownership with risk factors.

  3. Writing Performance of At-Risk Learners in Online Credit Recovery

    Science.gov (United States)

    Leiter, Michael P.

    2012-01-01

    Online credit recovery is becoming a popular choice for students needing to recover lost graduation credit due to course failure. The problem is that high school students who take online credit recovery classes in order to gain writing credit for graduation are failing the writing section on the state merit exam (MME). At-risk students and…

  4. 12 CFR 955.3 - Required credit risk-sharing structure.

    Science.gov (United States)

    2010-01-01

    ... 12 Banks and Banking 7 2010-01-01 2010-01-01 false Required credit risk-sharing structure. 955.3...-BALANCE SHEET ITEMS ACQUIRED MEMBER ASSETS § 955.3 Required credit risk-sharing structure. (a... conducting a rating review of the asset or pool of assets in a securitization transaction. (b) Credit risk...

  5. Effect of internal controls on credit risk among listed Spanish banks

    Directory of Open Access Journals (Sweden)

    Ellis Kofi Akwaa-Sekyi

    2016-02-01

    Full Text Available Purpose: The paper examines the effectiveness of internal control systems, explores the exposure of Spanish banks to the dangers of default as a result of internal control systems and establishes a relationship between internal controls and credit risk. Design/Methodology/Approach: Quantitative research approach is used to test hypotheses on the relationship between internal controls and credit risk among listed banks in Spain. Data from Bankscope and company websites from 2004-2013 were used. Generalized Least Squares (random effect econometric estimation technique was used for the model. Findings: We find that internal control systems are in place but their effectiveness cannot be guaranteed. This exposes Spanish listed banks to serious default situations. There is significant effect of internal controls on credit risk especially the control environment, risk management, control activities and monitoring. The non-disclosure of material internal control weakness is a contributory factor to the ineffective internal control systems. There is however a perceived board ineffectiveness which does not augur well for effective internal control systems. Board characteristics for Spanish banks confirm the agency theory. Research Limitations and Implications: Data unavailability for certain years, variables and many inactive banks did not permit a larger sample size than expected. The use of quantitative variables lacks flexibility. Practical Implications: Bank management will find the work useful to ensure strict enforcement of internal control mechanisms and see it as both credit risk and operational risk issues. Central bank should hurry to compel banks to disclose material internal control weakness as provided in the reviewed COSO framework. Social Implications: Ineffective internal controls lead to credit risks, bank closure and loss of investments. Society suffers a lot from such losses and contagion. Disclosure of material internal control

  6. Multiple challenges of risk management in EU credit institutions

    Directory of Open Access Journals (Sweden)

    Constantinescu, A.

    2011-01-01

    Full Text Available This paper is intended to be a significant insight into risk management issues by describing the main types of such risks and by providing management and evaluation procedures of significant risks into some active banking companies in Romania. In times of crisis, risk management in the banking system has a greater importance than in the normal economic times. The 2011 was a year in which Romania has been hit by the repercussions of the international economic crisis. Using strategies against risks, implementing procedures to monitor and control risks, risk assessment and quantification can substantially reduce the financial losses of a company or those of a financial institution. Risk management is an integral part of all decision making and business processes from credit institutions, its purpose being to protect their sustainable development. The innovations on the financial market, the internationalization of the specific operations, and the pressure of the competition are just a few arguments that impose a permanent supervision of the general and specific risks. This is the main reason why is compulsory to find new methods of managing risks, to keep in consideration the identification, evaluation of the management and the control of the banking system and of each bank.

  7. Financial performance as a decision criterion of credit scoring models selection [doi: 10.21529/RECADM.2017004

    Directory of Open Access Journals (Sweden)

    Rodrigo Alves Silva

    2017-09-01

    Full Text Available This paper aims to show the importance of the use of financial metrics in decision-making of credit scoring models selection. In order to achieve such, we considered an automatic approval system approach and we carried out a performance analysis of the financial metrics on the theoretical portfolios generated by seven credit scoring models based on main statistical learning techniques. The models were estimated on German Credit dataset and the results were analyzed based on four metrics: total accuracy, error cost, risk adjusted return on capital and Sharpe index. The results show that total accuracy, widely used as a criterion for selecting credit scoring models, is unable to select the most profitable model for the company, indicating the need to incorporate financial metrics into the credit scoring model selection process. Keywords Credit risk; Model’s selection; Statistical learning.

  8. Market-implied risk-neutral probabilities, actual probabilities, credit risk and news

    Directory of Open Access Journals (Sweden)

    Shashidhar Murthy

    2011-09-01

    Full Text Available Motivated by the credit crisis, this paper investigates links between risk-neutral probabilities of default implied by markets (e.g. from yield spreads and their actual counterparts (e.g. from ratings. It discusses differences between the two and clarifies underlying economic intuition using simple representations of credit risk pricing. Observed large differences across bonds in the ratio of the two probabilities are shown to imply that apparently safer securities can be more sensitive to news.

  9. High-Risk Health and Credit Behavior among 18- to 25-Year-Old College Students

    Science.gov (United States)

    Adams, Troy; Moore, Monique

    2007-01-01

    The number of students accumulating credit card debt--and the amount of debt itself--on college campuses is increasing. If high-risk credit and health behavior are associated, health behavior interventions might apply to high-risk credit behavior. Objective: The authors' purpose was to examine these possible associations. Participants and Methods:…

  10. Analisis Model Peramalan Status Kredit Kendaraan Bermotor pada Astra Credit Companies (ACC Cabang X Periode 2011

    Directory of Open Access Journals (Sweden)

    Tomy G. Soemapradja

    2012-05-01

    Full Text Available In order to increasing revenue, credit and financial institution, especially, automotive financing, gave lower interest rate. This, of course, will impact to the costumer with higher opportunity to have their dream which facilitated by those institutions. Despites to all economic risks and sales targets, credit and financial institutions have to empower their credit monitoring to anticipate earlier of credit defaults. Inspired by Altman’s research in 1968, about predicting bankruptcy of US companies, this research has purpose to determine which variable that significantly to the car loan status at Astra Credit Companies (ACC, and further continue to arrange prediction model of loan status and measure it’s accuracy level.. The statistic test shows there are 2 independent variables affect to dependent variable significantly, where model’s accuracy level achieves 100%.

  11. Binary Tree Pricing to Convertible Bonds with Credit Risk under Stochastic Interest Rates

    Directory of Open Access Journals (Sweden)

    Jianbo Huang

    2013-01-01

    Full Text Available The convertible bonds usually have multiple additional provisions that make their pricing problem more difficult than straight bonds and options. This paper uses the binary tree method to model the finance market. As the underlying stock prices and the interest rates are important to the convertible bonds, we describe their dynamic processes by different binary tree. Moreover, we consider the influence of the credit risks on the convertible bonds that is described by the default rate and the recovery rate; then the two-factor binary tree model involving the credit risk is established. On the basis of the theoretical analysis, we make numerical simulation and get the pricing results when the stock prices are CRR model and the interest rates follow the constant volatility and the time-varying volatility, respectively. This model can be extended to other financial derivative instruments.

  12. Evaluation of portfolio credit risk based on survival analysis for progressive censored data

    Science.gov (United States)

    Jaber, Jamil J.; Ismail, Noriszura; Ramli, Siti Norafidah Mohd

    2017-04-01

    In credit risk management, the Basel committee provides a choice of three approaches to the financial institutions for calculating the required capital: the standardized approach, the Internal Ratings-Based (IRB) approach, and the Advanced IRB approach. The IRB approach is usually preferred compared to the standard approach due to its higher accuracy and lower capital charges. This paper use several parametric models (Exponential, log-normal, Gamma, Weibull, Log-logistic, Gompertz) to evaluate the credit risk of the corporate portfolio in the Jordanian banks based on the monthly sample collected from January 2010 to December 2015. The best model is selected using several goodness-of-fit criteria (MSE, AIC, BIC). The results indicate that the Gompertz distribution is the best model parametric model for the data.

  13. Credit Risk Versus Performance in the Romanian Banking System

    Directory of Open Access Journals (Sweden)

    Sbârcea Ioana Raluca

    2017-12-01

    Full Text Available The Romanian banking sector, predominantly governed by the capital of foreign banks, is, as well as other international banking sectors, under the sign of the necessary balance that should exist between risk and performance. This is a result of banks trying to take risks that they can control, given that they need to generate financial results that are satisfactory for all categories of bank creditors, namely shareholders, depositors and other lenders. In this paper, I wanted to analyze the risk situation assumed by the main banks in the system versus the performance gained in recent years. This article is part of a wider research, so I will refer only to the main risk assumed by a bank, namely the credit risk, I will highlight the evolution of the indicators of this risk, so that I can finally analyze their degree of correlation with indicators for measuring bank performance. The situation of other financial risks in banking activity will be addressed in other works.

  14. Credit Unions and Capital Adequacy: Managing Growth and Risk

    Directory of Open Access Journals (Sweden)

    R. Raymond Sant PhD, CFA, CMA

    2013-07-01

    Full Text Available In this paper we argue that a financial institution needs to continuously monitor and assess its risk exposure in the context of capital requirements and available growth opportunities. Judicious management of the interaction between these three elements is crucial to the long term survival and growth of such an institution. We highlight different approaches to risk analysis, beyond stress testing, such as, Value at Risk and Monte Carlo simulation. We recommend that the board of directors establish a sub-committee of its directors to oversee risk management and capital control functions, and to monitor a credit union’s asset liability management activities on an ongoing basis. Efforts should also be made to increase the level of internal expertise regarding risk management and analysis with the full participation of the board, a function that should not be outsourced. In an increasingly regulated financial industry environment it is imperative that a financial institution seeks out growth opportunities while maintaining the balance between capital and risk exposure for long-term business continuity.

  15. Partially Observed Mixtures of IRT Models: An Extension of the Generalized Partial-Credit Model

    Science.gov (United States)

    Von Davier, Matthias; Yamamoto, Kentaro

    2004-01-01

    The generalized partial-credit model (GPCM) is used frequently in educational testing and in large-scale assessments for analyzing polytomous data. Special cases of the generalized partial-credit model are the partial-credit model--or Rasch model for ordinal data--and the two parameter logistic (2PL) model. This article extends the GPCM to the…

  16. Higher order saddlepoint approximations in the Vasicek portfolio credit loss model

    NARCIS (Netherlands)

    Huang, X.; Oosterlee, C.W.; van der Weide, J.A.M.

    2006-01-01

    This paper utilizes the saddlepoint approximation as an efficient tool to estimate the portfolio credit loss distribution in the Vasicek model. Value at Risk (VaR), the risk measure chosen in the Basel II Accord for the evaluation of capital requirement, can then be found by inverting the loss

  17. 75 FR 54020 - Federal Housing Administration Risk Management Initiatives: New Loan-to-Value and Credit Score...

    Science.gov (United States)

    2010-09-03

    ... Housing Administration Risk Management Initiatives: New Loan-to-Value and Credit Score Requirements AGENCY... acceptable risks of financial loss, not unacceptable risks.\\2\\ \\2\\ While the Federal Credit Reform Act of..., specific to each applicant. Lower credit scores indicate greater risk of default on any new credit extended...

  18. Risk Pricing in Emerging Economies: Credit Scoring and Private Banking in Iran

    Directory of Open Access Journals (Sweden)

    Yiannis Anagnostopoulos

    2016-01-01

    Full Text Available Iran’s banking industry as a developing country is comparatively very new to risk management practices. An inevitable predictive implication of this rapid growth is the growing concerns with regard to credit risk management which is the motivation of conducting this research. The paper focuses on the credit scoring aspect of credit risk management using both logit and probit regression approaches. Real data on corporate customers are available for conducting this research which is also a contribution to this area for all other developing countries. Our questions focus on how future customers can be classified in terms of credibility, which models and methods are more effective in better capturing risks. Findings suggest that probit approaches are more effective in capturing the significance of variables and goodness-of-fitness tests. Seven variables of the Ohlson O-Score model are used: CL_CA, INTWO, OENEG, TA_TL, SIZE, WCAP_TA, and ROA; two were found to be statistically significant in logit (ROA, TL_TA and three were statistically significant in probit (ROA, TL_TA, SIZE. Also, CL_CA, ROA, and WCAP_TA were the three variables with an unexpected correlation to the probability of default. The prediction power with the cut-off point is set equal to 26% and 56.91% for defaulted customers in both logit and probit models. However, logit achieved 54.85% correct estimation of defaulted assets, 0.37% more than what probit estimated.

  19. CREDIT SYSTEM AND CREDIT GUARANTEE PROGRAMS

    OpenAIRE

    Turgay GECER

    2012-01-01

    Credit system is an integrated architecture consisted of financial information, credit rating, credit risk management, receivables and credit insurance systems, credit derivative markets and credit guarantee programs. The main purpose of the credit system is to provide the functioning of all credit channels and to make it easy to access of credit sources demanded by all of real and legal persons in any economic system. Credit guarantee program, the one of prominent elements of the credit syst...

  20. An Analysis of the Factors Leading to Rising Credit Risk in the Zimbabwe Banking Sector

    Directory of Open Access Journals (Sweden)

    Maxwell Sandada

    2016-02-01

    Full Text Available The study sought to analyse the factors that lead to rising credit risk in the Zimbabwean banking sector. The objective was to ascertain the impact of macroeconomic, industry and bank specific factors on rising credit risk in in Zimbabwe. The study aimed at contributing to credit risk management literature by providing evidence Sub Saharan context. Being anchored on the positivist quantitative research approach, a survey was carried out gather the data that were analysed using descriptive, correlation and regression analyses. The results revealed that the most significant factors leading to credit risk in the Zimbabwean banking sector were macroeconomic and bank specific factors. The industry factors did not show a significant influence on the rising credit risk. The research findings of this study will a valuable addition to the existing knowledge and provide a platform for further research on how the credit risk problems can be dealt with. While credit risk is known as one of the risks inherent to any banking institutions, the alarming levels of credit risk in the Zimbabwe banking sector has motivated this current study to critically analyse the factors that have led to the high credit risk levels.

  1. Direct potable reuse microbial risk assessment methodology: Sensitivity analysis and application to State log credit allocations.

    Science.gov (United States)

    Soller, Jeffrey A; Eftim, Sorina E; Nappier, Sharon P

    2018-01-01

    Understanding pathogen risks is a critically important consideration in the design of water treatment, particularly for potable reuse projects. As an extension to our published microbial risk assessment methodology to estimate infection risks associated with Direct Potable Reuse (DPR) treatment train unit process combinations, herein, we (1) provide an updated compilation of pathogen density data in raw wastewater and dose-response models; (2) conduct a series of sensitivity analyses to consider potential risk implications using updated data; (3) evaluate the risks associated with log credit allocations in the United States; and (4) identify reference pathogen reductions needed to consistently meet currently applied benchmark risk levels. Sensitivity analyses illustrated changes in cumulative annual risks estimates, the significance of which depends on the pathogen group driving the risk for a given treatment train. For example, updates to norovirus (NoV) raw wastewater values and use of a NoV dose-response approach, capturing the full range of uncertainty, increased risks associated with one of the treatment trains evaluated, but not the other. Additionally, compared to traditional log-credit allocation approaches, our results indicate that the risk methodology provides more nuanced information about how consistently public health benchmarks are achieved. Our results indicate that viruses need to be reduced by 14 logs or more to consistently achieve currently applied benchmark levels of protection associated with DPR. The refined methodology, updated model inputs, and log credit allocation comparisons will be useful to regulators considering DPR projects and design engineers as they consider which unit treatment processes should be employed for particular projects. Published by Elsevier Ltd.

  2. Credit Risk Management in Banking Institutions: Comparison between Chinese Banks and UK Banks

    OpenAIRE

    YU, LIN

    2009-01-01

    The recent international financial market turmoil has a great effect on the banking industry; accordingly it is very necessary to investigate the topic of the credit risk management. This paper mainly discusses the importance, current situation, ways and guidelines of the credit risk management for the banking industry. A large number of literatures are integrated in order to illustrate and explain recent developments in both methods and principles of credit risk management. Meanwhile, some e...

  3. Uma sistemática para construção e escolha de modelos de previsão de risco de crédito Methodology for the construction and choice of credit risk prediction models

    Directory of Open Access Journals (Sweden)

    Lisiane Priscila Roldão Selau

    2009-09-01

    Full Text Available Com o aumento recente nos volumes de créditos a pessoas físicas e, por consequência, nos índices de inadimplência, as empresas estão buscando melhorar sua análise de crédito incorporando critérios objetivos. Técnicas multivariadas têm sido utilizadas para construir modelos de previsão de crédito que, baseados em informações cadastrais dos clientes, levam à criação de um padrão de comportamento em relação à inadimplência. O objetivo deste artigo é propor uma sistemática para construção de modelos de previsão de risco de crédito e avaliar seu desempenho usando três modelos específicos: análise discriminante, regressão logística e redes neurais. O método proposto (denominado Modelo PRC é composto de seis etapas: (i delimitação da população; (ii seleção da amostra; (iii análise preliminar; (iv construção do modelo; (v escolha do modelo; e (vi passos para implantação. O Modelo PRC foi aplicado em uma amostra de 17.005 clientes de uma rede de farmácias com crediário próprio. Os resultados para este banco de dados específico apontam uma pequena superioridade do modelo de redes neurais em relação aos outros modelos, que pode ser atribuída a sua não linearidade em relação à combinação de variáveis.Due to the growing consumer credit market and, therefore, insolvency indices, companies are seeking to improve their credit analysis by incorporating objective judgments. Multivariate techniques have been used to construct credit models. These models, based on consumer registration information, allow the identification of behavior standards concerning insolvency. The objective of this work is to propose a methodology for the construction of credit risk models and to evaluate prediction performance using three specific models: discriminant analysis, logistic regression, and neural networks. The proposed method (entitled PRC Model embraces six steps: (i population definition, (ii sampling, (iii

  4. A dynamic approach merging network theory and credit risk techniques to assess systemic risk in financial networks.

    Science.gov (United States)

    Petrone, Daniele; Latora, Vito

    2018-04-03

    The interconnectedness of financial institutions affects instability and credit crises. To quantify systemic risk we introduce here the PD model, a dynamic model that combines credit risk techniques with a contagion mechanism on the network of exposures among banks. A potential loss distribution is obtained through a multi-period Monte Carlo simulation that considers the probability of default (PD) of the banks and their tendency of defaulting in the same time interval. A contagion process increases the PD of banks exposed toward distressed counterparties. The systemic risk is measured by statistics of the loss distribution, while the contribution of each node is quantified by the new measures PDRank and PDImpact. We illustrate how the model works on the network of the European Global Systemically Important Banks. For a certain range of the banks' capital and of their assets volatility, our results reveal the emergence of a strong contagion regime where lower default correlation between banks corresponds to higher losses. This is the opposite of the diversification benefits postulated by standard credit risk models used by banks and regulators who could therefore underestimate the capital needed to overcome a period of crisis, thereby contributing to the financial system instability.

  5. Exchange credit risk: Measurement and implications on the stability of partially dollarized financial systems

    Directory of Open Access Journals (Sweden)

    Ernesto Mordecki

    2013-06-01

    Full Text Available Some emergent economies present a high financial dollarization in loans and deposits, generating a specific risk in the banking activity. We quantify this exchange credit risk as the price of an option equivalent to this loan, and discuss the financial stability implications due to the (implicit issuance of these options. The exchange rate is modeled through a Levy process. The depth of the market depends on the type of the currencies involved. Whenever possible, we depart from option prices to calibrate a model, like in the EUR/USD market. But if the market is not liquid, as the USD/UYU market, we provide alternative pricing methodologies.

  6. A Pruning Neural Network Model in Credit Classification Analysis

    Directory of Open Access Journals (Sweden)

    Yajiao Tang

    2018-01-01

    Full Text Available Nowadays, credit classification models are widely applied because they can help financial decision-makers to handle credit classification issues. Among them, artificial neural networks (ANNs have been widely accepted as the convincing methods in the credit industry. In this paper, we propose a pruning neural network (PNN and apply it to solve credit classification problem by adopting the well-known Australian and Japanese credit datasets. The model is inspired by synaptic nonlinearity of a dendritic tree in a biological neural model. And it is trained by an error back-propagation algorithm. The model is capable of realizing a neuronal pruning function by removing the superfluous synapses and useless dendrites and forms a tidy dendritic morphology at the end of learning. Furthermore, we utilize logic circuits (LCs to simulate the dendritic structures successfully which makes PNN be implemented on the hardware effectively. The statistical results of our experiments have verified that PNN obtains superior performance in comparison with other classical algorithms in terms of accuracy and computational efficiency.

  7. Analysis of empirical determinants of credit risk in the banking sector of the Republic of Serbia

    Directory of Open Access Journals (Sweden)

    Račić Željko

    2016-01-01

    Full Text Available The aim of this paper is the detection and analysis of empirical determinants of credit risk in the banking sector of the Republic of Serbia. The paper is based on an analysis of results of the application of the linear regression model, during the period from the third quarter of 2008 to the third quarter of 2014. There are three main findings. Firstly, the higher lending activity of banks contributes to the increasing share of high-risk loans in the total withdrawn loans (delayed effect of 3 years. Secondly, the growth of loans as opposed to deposits contributes to the increased exposure of banks to credit risk. Thirdly, the factors that reduce the exposure of banks to credit risk increase profitability, growth of interest rate spread and real GDP growth. Bearing in mind the overall market conditions and dynamics of the economic recovery of the country, there is a general conclusion based on the results that in the coming period the question of non-performing loans (NPLs in the Republic of Serbia will present a challenge for both lenders and borrowers.

  8. Formation of borrower’s bank credit scoring integrated model

    Directory of Open Access Journals (Sweden)

    O.V. Lysenok

    2017-03-01

    Full Text Available The article proposes the borrower’s bank credit scoring model that is of particular relevance in an unstable world and Ukrainian financial markets. The essence of this integrated model is the consistent definition of indicators, which analyze the financial and economic situation and development of scoring that allows to calculate overall index, that is, the integral factor of credit scoring level of the bank to calculate which one uses the formed set of factors characterizing riskiness, profitability and liquidity of the banking institution. The author determines the factors according to their functional purpose; the former ones are divided into four groups: capital adequacy, loan portfolio quality, profitability and liquidity. Each group consists of four indicators; each indicator is assigned thresholds to determine the appropriate credit scoring level of the bank for one or another direction. The higher is the value of the integral factor, the more efficient and less risky is the financial and economic activity of banks and the higher is their credit scoring level. The study concludes that the proposed model for bank credit scoring differs with its transparency and clarity due to use in its implementation only public information. The disadvantages include the presence of the subjective factor in assigning a certain number of points based on expert and normative methods.

  9. An Application Relating To Credit Risk and Credit Risk Management in Tu rkish Banking System: The Case of Turkey Garanti Bank

    Directory of Open Access Journals (Sweden)

    Seyhan Çil Koçyiğit

    2014-09-01

    Full Text Available Within the globalization process of the world, at the competitive area arised as a result of the rapid increase in the number of banks and their branches in developing countries, the vigorously existance of banks depend on the management of the risks faced successfully. Banks must establish their credit strategies onto a good risk managment. Indeed, it is the inevitable fact that the success of financial institutions depends on having a powerful risk management system. In this study, by using the banking ratios, it is aimed to investigate the credit-risk changes of Turkish Garanti Bank (S.C. by three-month periods of 2007–2012 and give information about the risk management of Turkish Garanti Bank (S.C.. In conclusion, it is seen that, at Turkish Garanti Bank (S.C., credit risk is measured and evaluated in accordance with international standards, and all risk management is executing in parallel with Basel II regulations.

  10. Fitting and Testing Conditional Multinormal Partial Credit Models

    Science.gov (United States)

    Hessen, David J.

    2012-01-01

    A multinormal partial credit model for factor analysis of polytomously scored items with ordered response categories is derived using an extension of the Dutch Identity (Holland in "Psychometrika" 55:5-18, 1990). In the model, latent variables are assumed to have a multivariate normal distribution conditional on unweighted sums of item…

  11. Understanding Rasch Measurement: Partial Credit Model and Pivot Anchoring.

    Science.gov (United States)

    Bode, Rita K.

    2001-01-01

    Describes the Rasch measurement partial credit model, what it is, how it differs from other Rasch models, and when and how to use it. Also describes the calibration of instruments with increasingly complex items. Explains pivot anchoring and illustrates its use and describes the effect of pivot anchoring on step calibrations, item hierarchy, and…

  12. STOCHASTIC MODELING OF OPTIMIZED CREDIT STRATEGY OF A DISTRIBUTING COMPANY ON THE PHARMACEUTICAL MARKET

    Directory of Open Access Journals (Sweden)

    M. Boychuk

    2015-10-01

    Full Text Available The activity of distribution companies is multifaceted. Ihey establish contacts with producers and consumers, determine the range of prices of medicines, do promotions, hold stocks of pharmaceuticals and take risks in their further selling.Their internal problems are complicated by the political crisis in the country, decreased purchasing power of national currency, and the rise in interest rates on loans. Therefore the usage of stochastic models of dynamic systems for the research into optimizing the management of pharmaceutical products distribution companies taking into account credit payments is of great current interest. A stochastic model of the optimal credit strategy of a pharmaceutical distributor in the market of pharmaceutical products has been constructed in the article considering credit payments and income limitations. From the mathematical point of view the obtained problem is the one of stochastic optimal control where the amount of monetary credit is the control and the amount of pharmaceutical product is the solution curve. The model allows to identify the optimal cash loan and the corresponding optimal quantity of pharmaceutical product that comply with the differential model of the existing quantity of pharmaceutical products in the form of Ito; the condition of the existing initial stock of pharmaceutical products; the limitation on the amount of credit and profit received from the product selling and maximize the average integral income. The research of the stochastic optimal control problem involves the construction of the left process of crediting with determination of the shift point of that control, the choice of the right crediting process and the formation of the optimal credit process. It was found that the optimal control of the credit amount and the shift point of that control are the determined values and don’t depend on the coefficient in the Wiener process and the optimal trajectory of the amount of

  13. Bank Behavior with Access to Credit Risk Transfer Markets

    NARCIS (Netherlands)

    Goderis, B.V.G.; Marsh, I.; Vall Castello, J.; Wagner, W.B.

    2006-01-01

    One of the most important recent innovations in financial markets has been the development of credit derivative products that allow banks to more actively manage their credit portfolios than ever before.We analyze the effect that access to these markets has had on the lending behavior of a sample of

  14. CREDIT RISK ASSESSMENT IN THE ROMANIAN BANKING SYSTEM. EVIDENCE FROM THE RECENT FINANCIAL CRISIS

    Directory of Open Access Journals (Sweden)

    Anamaria Avadanei

    2011-12-01

    Full Text Available The financial crisis followed by the recession has adversely affected the quality of Romanian banking assets. The aim of this paper is to point out the implications of credit risk in the Romanian banking system following the accelerate dynamics of credit activity before the financial crisis and the effects vs. solutions proposed and implemented in recent years. Structured on four parts, the study presents the recent contributions in the crisis-lending relationship, the main features of the Romanian banking system, the evaluation of credit risk in terms of numbers, facts, actions and a short analysis of the correlation between credit indicators (consumer credit, credit risk ratio, medium exchange rate and the number of employees in the economy. To conclude, we propose to define the key points of the future Romanian banking activity.

  15. Advanced empirical estimate of information value for credit scoring models

    Directory of Open Access Journals (Sweden)

    Martin Řezáč

    2011-01-01

    Full Text Available Credit scoring, it is a term for a wide spectrum of predictive models and their underlying techniques that aid financial institutions in granting credits. These methods decide who will get credit, how much credit they should get, and what further strategies will enhance the profitability of the borrowers to the lenders. Many statistical tools are avaiable for measuring quality, within the meaning of the predictive power, of credit scoring models. Because it is impossible to use a scoring model effectively without knowing how good it is, quality indexes like Gini, Kolmogorov-Smirnov statisic and Information value are used to assess quality of given credit scoring model. The paper deals primarily with the Information value, sometimes called divergency. Commonly it is computed by discretisation of data into bins using deciles. One constraint is required to be met in this case. Number of cases have to be nonzero for all bins. If this constraint is not fulfilled there are some practical procedures for preserving finite results. As an alternative method to the empirical estimates one can use the kernel smoothing theory, which allows to estimate unknown densities and consequently, using some numerical method for integration, to estimate value of the Information value. The main contribution of this paper is a proposal and description of the empirical estimate with supervised interval selection. This advanced estimate is based on requirement to have at least k, where k is a positive integer, observations of socres of both good and bad client in each considered interval. A simulation study shows that this estimate outperform both the empirical estimate using deciles and the kernel estimate. Furthermore it shows high dependency on choice of the parameter k. If we choose too small value, we get overestimated value of the Information value, and vice versa. Adjusted square root of number of bad clients seems to be a reasonable compromise.

  16. Loss given default models incorporating macroeconomic variables for credit cards

    OpenAIRE

    Crook, J.; Bellotti, T.

    2012-01-01

    Based on UK data for major retail credit cards, we build several models of Loss Given Default based on account level data, including Tobit, a decision tree model, a Beta and fractional logit transformation. We find that Ordinary Least Squares models with macroeconomic variables perform best for forecasting Loss Given Default at the account and portfolio levels on independent hold-out data sets. The inclusion of macroeconomic conditions in the model is important, since it provides a means to m...

  17. Assessment of Credit Risk Approaches in Relation with Competitiveness Increase of the Banking Sector

    Directory of Open Access Journals (Sweden)

    Cipovová Eva

    2012-06-01

    Full Text Available The article is focused on a presentation and analysis of selected methods of credit risk management in relation with competitiveness increase of the banking sector. The article is defined credit risk approaches under the Basel III gradually. Aim of this contribution constitutes various methods of credit risk management and effects of their usage on regulatory capital amount in respect of corporate exposures. Optimal equity amount in relation to the risk portfolio presents an essential prerequisite of performance and competitiveness growth of commercial banks. Gradually capital requirements using Standardized Approach and Internal Based Approach in a case of used and unused techniques of credit risk reduce has been quantified. We presume that sophisticated approach means significant saving for bank’s equity which increases competitiveness of banking sector also. Within the article, quantification of capital savings in case of Standardized (with and without assigned external ratings and Foundation Internal Based Approach at the selected credit portfolio has been effected.

  18. Economic policy uncertainty, credit risks and banks lending decisions: Evidence from Chinese commercial banks

    Institute of Scientific and Technical Information of China (English)

    Qinwei Chi; Wenjing Li

    2017-01-01

    Using data for Chinese commercial banks from 2000 to 2014, this paper examines the effects of economic policy uncertainty(EPU) on banks’ credit risks and lending decisions. The results reveal significantly positive connections among EPU and non-performing loan ratios, loan concentrations and the normal loan migration rate. This indicates that EPU increases banks’ credit risks and negatively influences loan size, especially for joint-equity banks. Given the increasing credit risks generated by EPU, banks can improve operational performance by reducing loan sizes. Further research indicates that the effects of EPU on banks’ credit risks and lending decisions are moderated by the marketization level, with financial depth moderating the effect on banks’ credit risks and strengthening it on lending decisions.

  19. THE INFLUENCE OF MACROECONOMIC CONDITIONS ON CREDIT RISK: CASE OF ROMANIAN BANKING SYSTEM

    Directory of Open Access Journals (Sweden)

    Iulia Andreea Bucur

    2014-07-01

    Full Text Available This paper aims to explore the interactions between macroeconomic conditions, such as: real GDP growth rate, inflation rate, market interest rate, broad money supply, foreign exchange rate fluctuation and unemployment rate, and credit risk in Romanian banking sector during 2008-2013. The interrelations of indicators’ complexity imply a multidimensional statistical analysis in order to find a relation between the macroeconomic conditions and the credit risk. Our regression analysis findings confirm the hypothesis according to which the money supply growth rate and the market foreign exchange rate are negatively related with credit risk and the unemployment rate is positively related with it. Furthermore, our findings revealed that the credit risk is significantly and negatively affected by the exchange rate fluctuation and significantly and positively affected by the unemployment rate. The results do not indicate a significant relationship between credit risk and real GDP growth rate.

  20. Bank Credit Risk Management and Rating Migration Analysis on the Business Cycle

    Directory of Open Access Journals (Sweden)

    Dimitris Gavalas

    2014-03-01

    Full Text Available Credit risk measurement remains a critical field of top priority in banking finance, directly implicated in the recent global financial crisis. This paper examines the dynamic linkages between credit risk migration due to rating shifts and prevailing macroeconomic conditions, reflected in alternative business cycle states. An innovative empirical methodology applies to bank internal rating data, under different economic scenarios and investigates the implications of credit risk quality shifts for risk rating transition matrices. The empirical findings are useful and critical for banks to align to Basel guidelines in relation to core capital requirements and risk-weighted assets in the underlying loan portfolio.

  1. Detecting Math Anxiety with a Mixture Partial Credit Model

    Science.gov (United States)

    Ölmez, Ibrahim Burak; Cohen, Allan S.

    2017-01-01

    The purpose of this study was to investigate a new methodology for detection of differences in middle grades students' math anxiety. A mixture partial credit model analysis revealed two distinct latent classes based on homogeneities in response patterns within each latent class. Students in Class 1 had less anxiety about apprehension of math…

  2. THE IMPORTANCE OF THE LIQUIDITY RISK IN THE MANAGEMENT OF THE CREDIT INSTITUTIONS

    Directory of Open Access Journals (Sweden)

    Costea Ciprian-Dan

    2013-03-01

    Full Text Available The credit institutions management faces nowadays new and important challenges, of which the most important is the central role the liquidity risk management takes in the overall banking management complexity. This shows that liquidity risk in at the top of attention in the modern banking management, all the other banking risks being subsequent to this one. International regulations and settlers come to sustain the rising importance of liquidity risk in modern credit institution management.

  3. A Quantitative Approach to Credit Risk Management in the Underwriting Process for the Retail Portfolio

    Directory of Open Access Journals (Sweden)

    Andreea Costea

    2017-03-01

    Full Text Available The core of this paper encloses a mathematical approach of credit risk management, based on a scorecard model used in the bank’s underwriting process. The main purpose of this paper is to present how to develop, validate and apply a rating model in practice. Using 21568 loan applications provided by one of the largest banks from Romania, a scorecard is built for the underwriting purposes. The customer data used in the modeling is based on socio-demographic characteristics. The model is developed according to a set of statistical methods for parameter estimation. A real-life example of how to use such a model in the strategic decisions of a bank is presented. The cut-off score for the acceptance of the applications is calibrated to a potential risk appetite of the main four banks in Romania. From an evaluative perspective, this paper is compatible with an exploratory approach to quantitative research methodology.

  4. The impact of macroeconomic variables on the evolution of the credit risk rate

    Directory of Open Access Journals (Sweden)

    Luminița Gabriela Istrate

    2018-03-01

    Full Text Available The dynamics of the real economy is a major driver of the evolution of arrears at the level of the pool of loans granted to non-financial companies, completed by the financial pressure induced by the monetary conditions. Lending allows on the one hand providing resources for companies that need financing for investment projects, on the other hand, it supports the fund holders to place resources for obtaining profit. The role of the lending policy in the activity of commercial banks is very important, as it may influence both the cost of credits and the loan portfolio quality in the future. The purpose of this research is to find the macroeconomic variables that significantly influence credit risk and to develop a statistical model for predicting the doubtful and non-performing loans rate. Thus, it is envisaged the research of mechanisms by which the dynamics of the real economy and the money market conditions influence the evolution of the credit risk in different business sectors.

  5. An inventory model with a new credit drift: Flexible trade credit policy

    Directory of Open Access Journals (Sweden)

    Ankit Prakash Tyagi

    2016-01-01

    Full Text Available In most of the published articles dealing with optimal order quantity model under permissible delay in payments, it is assumed that the supplier only put forwards fully permissible delay in payments if retailer ordered a bulky sufficient quantity otherwise permissible delay in payments would not be permitted. Practically, in competitive market environments and recession phases of business, every supplier wants to attract more retailers by the help of providing good facilities for trading. Necessity of order quantity may put a negative pressure on supplier’s demand. So, within the economic order quantity (EOQ framework the main purpose of this paper is to broaden this extreme case by introducing a new credit policy, Flexible Trade Credit Policy (FTCP, for supplier which can help him provide more free space of trading to retailers. This policy, after adopting by suppliers, not only provides attractive trading environments for retailers but also enhances the demand of supplier due to the large number of new retailers. Here in, under this policy, an inventory system is investigated as a cost minimization problem to establish the retailer’s optimal inventory cycle time and optimal order quantity. Three theorems are established to describe and to lighten optimal replenishment policies for the retailer. Finally, numerical examples are considered to illustrate all these theorems and managerial insights are given based on considered numerical examples.

  6. Bank Lending Policy, Credit Scoring and Value at Risk

    OpenAIRE

    Jacobson, Tor; Roszbach, Kasper

    1998-01-01

    In this paper we apply a bivariate probit model to investigate the implications of bank lending policy. In the first equation we model the bank´s decision to grant a loan, in the second the probability of default. We confirm that banks provide loans in a way that is not consistent with default risk minimization. The lending policy must thus either be inefficient or be the result of some other type of optimizing behavior than expected profit maximization. Value at Risk, being a value weighted ...

  7. Optimal Designs for the Generalized Partial Credit Model

    OpenAIRE

    Bürkner, Paul-Christian; Schwabe, Rainer; Holling, Heinz

    2018-01-01

    Analyzing ordinal data becomes increasingly important in psychology, especially in the context of item response theory. The generalized partial credit model (GPCM) is probably the most widely used ordinal model and finds application in many large scale educational assessment studies such as PISA. In the present paper, optimal test designs are investigated for estimating persons' abilities with the GPCM for calibrated tests when item parameters are known from previous studies. We will derive t...

  8. Oil Prices, Credit Risks in Banking Systems, and Macro-Financial Linkages across GCC Oil Exporters

    Directory of Open Access Journals (Sweden)

    Saleh Alodayni

    2016-11-01

    Full Text Available This paper assesses the effect of the recent 2014–2015 oil price slump on the financial stability in the Gulf Cooperation Council (GCC region. The first objective of this paper is to assess how oil price shock propagates within the macroeconomy and how the macro shocks transmit to GCC banks’ balance sheets. This part of the paper implements a System Generalized Method of Moments (GMM and a Panel Fixed Effect Model to estimate the response of nonperforming loans (NPLs to its macroeconomic determinants. The second objective of this paper is to assess any negative feedback effects between the GCC banking systems and the economy. The paper, therefore, implements a Panel VAR model to explore the macro-financial linkages between GCC banking systems and the real economy. The results indicate that oil price, non-oil GDP, interest rate, stock prices, and housing prices are major determinants of NPLs across GCC banks and the overall financial stability in the region. Credit risk shock tends to propagate disturbances to non-oil GDP, credit growth, and stock prices across GCC economies. A higher level of NPLs restricts banks’ credit growth and can dampen economic growth in these economies. The results support the notion that disturbances in banking systems lead to unwanted economic consequences for the real sector.

  9. The Effect of Credit Lines and Risks on Operations of Microfinance ...

    African Journals Online (AJOL)

    ... and make sure that loans are used for the purpose for which they were given as this will reduce the number of non performing loans. Keywords: Microfinance, Microfinance banks, Credit lines, Credit risks, Banks' depositors. International Journal of Development and Management Review (INJODEMAR) Vol. 7 June, 2012 ...

  10. Credit Spread Modeling: Macro-financial versus HOC Approach

    Directory of Open Access Journals (Sweden)

    Sanja Dudaković

    2014-12-01

    Full Text Available The aim of this paper is to throw light on the relationship between credit spread changes and past changes of U.S. macro-financial variables when invariants do not have Gaussian distribution. The first part presents the empirical analysis which is based on 10-year AAA corporate bond yields and 10-year Treasury bond yields. Explanatory variables include lagged U.S. leading index, Russell 2000 returns, BBB bond price changes interest rate swaps, exchange rates EUR/ USD, Repo rates, S& P 500 returns and S&P 500 volatility, Treasury bill changes, liquidity index-TRSW, LIBOR rates, Moody’s default rates; credit spread volatility and Treasury bills volatility. The proposed dynamical model explains 73% of the U.S. credit spread variance for the period 1999:07-2013:07. The second part of the article introduces the parameter estimation method based on higher order cumulants. It is demonstrated empirically that much of the information about variability of Credit Spread can be extracted from higher order cumulant function (85%.

  11. A Semiparametric Time Trend Varying Coefficients Model: With An Application to Evaluate Credit Rationing in U.S. Credit Market

    OpenAIRE

    Jingping Gu; Paula Hernandez-Verme

    2009-01-01

    In this paper, we propose a new semiparametric varying coefficient model which extends the existing semi-parametric varying coefficient models to allow for a time trend regressor with smooth coefficient function. We propose to use the local linear method to estimate the coefficient functions and we provide the asymptotic theory to describe the asymptotic distribution of the local linear estimator. We present an application to evaluate credit rationing in the U.S. credit market. Using U.S. mon...

  12. A Semiparametric Time Trend Varying Coefficients Model: With An Application to Evaluate Credit Rationing in U.S. Credit Market

    OpenAIRE

    Qi Gao; Jingping Gu; Paula Hernandez-Verme

    2012-01-01

    In this paper, we propose a new semiparametric varying coefficient model which extends the existing semi-parametric varying coefficient models to allow for a time trend regressor with smooth coefficient function. We propose to use the local linear method to estimate the coefficient functions and we provide the asymptotic theory to describe the asymptotic distribution of the local linear estimator. We present an application to evaluate credit rationing in the U.S. credit market. Using U.S. mon...

  13. Global Credit Risk: World, Country and Industry Factors

    NARCIS (Netherlands)

    Schwaab, B.; Koopman, S.J.; Lucas, A.

    2017-01-01

    We investigate the dynamic properties of systematic default risk conditions for firms in different countries, industries and rating groups. We use a high-dimensional nonlinear non-Gaussian state-space model to estimate common components in corporate defaults in a 41 country samples between 1980:Q1

  14. 26 CFR 5c.168(f)(8)-7 - Reporting of income, deductions and investment tax credit; at risk rules.

    Science.gov (United States)

    2010-04-01

    ... tax credit; at risk rules. 5c.168(f)(8)-7 Section 5c.168(f)(8)-7 Internal Revenue INTERNAL REVENUE... investment tax credit; at risk rules. (a) In general. The fact that the lessor's payments of interest and... property shall be limited to the extent the at risk rules under the investment tax credit provisions and...

  15. Disaster risk financing and contingent credit : a dynamic analysis

    OpenAIRE

    Clarke, Daniel; Mahul, Olivier

    2011-01-01

    This paper aims to assist policy makers interested in establishing or strengthening financial strategies to increase the financial response capacity of developing country governments in the aftermath of natural disasters, while protecting their long-term fiscal balance. Contingent credit is shown to increase the ability of governments to self-insure by relaxing their short-term liquidity c...

  16. Entropy measure of credit risk in highly correlated markets

    Science.gov (United States)

    Gottschalk, Sylvia

    2017-07-01

    We compare the single and multi-factor structural models of corporate default by calculating the Jeffreys-Kullback-Leibler divergence between their predicted default probabilities when asset correlations are either high or low. Single-factor structural models assume that the stochastic process driving the value of a firm is independent of that of other companies. A multi-factor structural model, on the contrary, is built on the assumption that a single firm's value follows a stochastic process correlated with that of other companies. Our main results show that the divergence between the two models increases in highly correlated, volatile, and large markets, but that it is closer to zero in small markets, when asset correlations are low and firms are highly leveraged. These findings suggest that during periods of financial instability, when asset volatility and correlations increase, one of the models misreports actual default risk.

  17. The Credit-Risk Decision Mechanism on Fixed Loan Interest Rate with Imperfect Information

    Institute of Scientific and Technical Information of China (English)

    2001-01-01

    In this paper, decision mechanism of credit-risk for banks is studied when the loan interest rate is fixed with asymmetry information in credit market. We give out the designs of rationing and non-rationing on credit risky decision mechanism when collateral value provided by an entrepreneur is not less than the minimum demands of the bank. It shows that under the action of the mechanism, banks could efficiently identify the risk size of the project. Finally, the condition of the project investigation of bank is given over again.

  18. Credit risk disclosure in the annual financial statements of Bulgarian banks

    OpenAIRE

    Anita Atanassova; Nadezhda Popova-Yosifova

    2018-01-01

    The paper analyzes the credit risk disclosure in the annual financial statements of Bulgarian banks for 2015 and 2016. Banks are ranked according to the level of credit risk disclosure, in accordance with the requirements of international accounting regulations and in relation to financial and regulatory ratios linked to capital adequacy. As a result of the conducted empirical study, it is concluded that banks' management is not particularly inclined to make full disclosures and actively to d...

  19. Two Stage Fuzzy Methodology to Evaluate the Credit Risks of Investment Projects

    OpenAIRE

    O. Badagadze; G. Sirbiladze; I. Khutsishvili

    2014-01-01

    The work proposes a decision support methodology for the credit risk minimization in selection of investment projects. The methodology provides two stages of projects’ evaluation. Preliminary selection of projects with minor credit risks is made using the Expertons Method. The second stage makes ranking of chosen projects using the Possibilistic Discrimination Analysis Method. The latter is a new modification of a well-known Method of Fuzzy Discrimination Analysis.

  20. Effect of internal controls on credit risk among listed Spanish banks

    OpenAIRE

    Akwaa-Sekyi, Ellis Kofi; Moreno Gené, Jordi

    2016-01-01

    Purpose: The paper examines the effectiveness of internal control systems, explores the exposure of Spanish banks to the dangers of default as a result of internal control systems and establishes a relationship between internal controls and credit risk. Design/Methodology/Approach: Quantitative research approach is used to test hypotheses on the relationship between internal controls and credit risk among listed banks in Spain. Data from Bankscope and company websites from 2004-2013 were used...

  1. A Theoretical Argument Why the t-Copula Explains Credit Risk Contagion Better than the Gaussian Copula

    Directory of Open Access Journals (Sweden)

    Didier Cossin

    2010-01-01

    Full Text Available One of the key questions in credit dependence modelling is the specfication of the copula function linking the marginals of default variables. Copulae functions are important because they allow to decouple statistical inference into two parts: inference of the marginals and inference of the dependence. This is particularly important in the area of credit risk where information on dependence is scant. Whereas the techniques to estimate the parameters of the copula function seem to be fairly well established, the choice of the copula function is still an open problem. We find out by simulation that the t-copula naturally arises from a structural model of credit risk, proposed by Cossin and Schellhorn (2007. If revenues are linked by a Gaussian copula, we demonstrate that the t-copula provides a better fit to simulations than does a Gaussian copula. This is done under various specfications of the marginals and various configurations of the network. Beyond its quantitative importance, this result is qualitatively intriguing. Student's t-copulae induce fatter (joint tails than Gaussian copulae ceteris paribus. On the other hand observed credit spreads have generally fatter joint tails than the ones implied by the Gaussian distribution. We thus provide a new statistical explanation why (i credit spreads have fat joint tails, and (ii financial crises are amplified by network effects.

  2. Papers of a Canadian Institute conference on successfully managing counter party credit risk : fundamentals and essentials for the energy industry

    International Nuclear Information System (INIS)

    2003-01-01

    The main focus of this conference is the management of credit risk for major energy trading and marketing companies. The papers deal with pertinent issues such as the development and implementation of corporate credit risk management policy, credit risk exposure reporting systems, and the quality of ratings in the utility sector. Risk management strategies include quantitative and subjective credit factors, credit scoring, risk mitigation, limit-setting methodologies, measurement of liquidity, capital markets access, portfolio management, and the development of policies, procedures and control. Three presentations were indexed separately for inclusion in the database. refs., tabs., figs

  3. Papers of a Canadian Institute conference on successfully managing counter party credit risk : fundamentals and essentials for the energy industry

    Energy Technology Data Exchange (ETDEWEB)

    NONE

    2003-07-01

    The main focus of this conference is the management of credit risk for major energy trading and marketing companies. The papers deal with pertinent issues such as the development and implementation of corporate credit risk management policy, credit risk exposure reporting systems, and the quality of ratings in the utility sector. Risk management strategies include quantitative and subjective credit factors, credit scoring, risk mitigation, limit-setting methodologies, measurement of liquidity, capital markets access, portfolio management, and the development of policies, procedures and control. Three presentations were indexed separately for inclusion in the database. refs., tabs., figs.

  4. Modernization of credit relations

    Directory of Open Access Journals (Sweden)

    S.V. Volosovich

    2015-03-01

    Full Text Available Nowadays it is essential to modernize credit relations in the conditions of global economy transformations. This is due to the influence of integration processes on credit relations and transformation of the risks inherent in the credit field. The purpose of this article is to develop measures that help to improve the efficiency of interaction of credit relations’ participants. Modernization of credit relations is based on the interaction of its main and indirect subjects who belong to the subsystems of loans granting, deposits attraction and provision of related services. Its goal is to pass from extensive to intensive model of interaction between the subjects of credit relations. Components of the credit relations modernization are the following: institutional modernization, which is based on the interaction of credit relations’ subjects, and ensures the development of competition in all credit market’s segments, the creation of its corresponding infrastructure, qualitative change in the approaches of regulation and supervision; technological modernization, which involves the formation of joint products on the credit market and the formation of an integrated informational and analytical system. In the result of the credit relations’ modernization it is expected to achieve synergies between the subjects of credit relations, that will lead to changes in the business architecture of the financial market.

  5. Credit risk disclosure in the annual financial statements of Bulgarian banks

    Directory of Open Access Journals (Sweden)

    Anita Atanassova

    2018-05-01

    Full Text Available The paper analyzes the credit risk disclosure in the annual financial statements of Bulgarian banks for 2015 and 2016. Banks are ranked according to the level of credit risk disclosure, in accordance with the requirements of international accounting regulations and in relation to financial and regulatory ratios linked to capital adequacy. As a result of the conducted empirical study, it is concluded that banks' management is not particularly inclined to make full disclosures and actively to declare internal qualitative and quantitative information. However, the level of disclosure of credit risk for banks in Bulgaria is high. Banks with a low degree of capital adequacy tend to make a more complete disclosure of credit risk, and vice versa. There were no indications of a link between the size of the bank assets, the existence of the bank as a public company and the disclosure of credit risk. We believe that, in the context of increased competition, the disclosure of credit risk from a formal requirement may become one of the many tools to stabilize the position of certain banks and create a positive image of the bank for public information users.

  6. Credit Risk Determinants in the Vulnerable Economies of Europe: Evidence from the Spanish Banking System

    Directory of Open Access Journals (Sweden)

    Gila-Gourgoura, E.

    2017-03-01

    Full Text Available Purpose: The purpose of this paper is to investigate the determinants of non-performing loans in the Spanish banking system over the period 1997Q4–2015Q3. This timeframe includes not only the booming period for the Spanish economy but also an extended post-crises interval which is missing from other studies for Spain. Design/methodology/approach: Using quarterly data from the Central Bank of Spain and from the European Central Bank, the paper employs the ARDL approach to cointegration to identify the existence of a long or short-run relationship between NPLs and a set of macroeconomic, bank-related and country-specific indicators. Findings: Findings from the ARDL model indicate that macroeconomic, bank-specific variables and interest rates are important determinants of non-performing loans in the Spanish banking system. Specifically, the real GDP, the Spanish long-term government bond yield, the return on equity, the total credit granted by the Spanish banks and their capital to assets ratio, explain credit risk in Spain both in the short and the long run. Research limitations/implications: Data on the bank-specific variables are for the whole banking industry, and not for individual banks. If such data were available, a comparison of the credit risk determinants between small/ big banks, private/public or domestic/foreign could be possibly made. Originality/value: These findings provide useful evidence to bank managers and policymakers in dealing with loans' defaults in Spain and in undertaking crucial reforms to stabilize the economy.

  7. Bankruptcy prediction for credit risk using neural networks: a survey and new results.

    Science.gov (United States)

    Atiya, A F

    2001-01-01

    The prediction of corporate bankruptcies is an important and widely studied topic since it can have significant impact on bank lending decisions and profitability. This work presents two contributions. First we review the topic of bankruptcy prediction, with emphasis on neural-network (NN) models. Second, we develop an NN bankruptcy prediction model. Inspired by one of the traditional credit risk models developed by Merton (1974), we propose novel indicators for the NN system. We show that the use of these indicators in addition to traditional financial ratio indicators provides a significant improvement in the (out-of-sample) prediction accuracy (from 81.46% to 85.5% for a three-year-ahead forecast).

  8. Credit Risk Determinants in Banking Sector: A Comparative Analysis of the PIB (Pakistan, India and Bangladesh

    Directory of Open Access Journals (Sweden)

    Muhammad Waqas

    2017-02-01

    Full Text Available The aim of the empirical study is to investigate credit risk determinants in banking sectors across three kinds of South Asian economies. An accumulated sample of 105 unbalanced panel data of financial firms over the period of 2000-2015, by applying General Method of Moment (GMM estimation techniques one-step at the difference in order to identify factors influencing credit risk. This study is inspired by two broad categories of explanatory variables which are bank-specific and macroeconomic. Bank-specific factors influencing unsystematic risk, while macroeconomic factors promoting systematic risk. The study uses a proxy of non-performing loans for credit risk in banking sectors of Pakistan, India, and Bangladesh. The empirical results have been found aligned with theoretical arguments and literature as expected. In comparison, NPLs in Pakistan is greater than India and Bangladesh, while India has the lowest ratio of non-performing loans. The study documents that bank-specific factors (inefficiency, profitability, capital ratio and leverage have a significant contribution towards credit risk. Further, the study also finds a significant impact of macroeconomic variables on non-performing loans. While, the result in the case of Bangladesh predict contradictions, that have no significant effect on non-performing loans at various level. The overall results indicate that credit risk is not influenced by only external factors but also affect by internal factors like bad management and skimping etc.

  9. The influence of external factors on the credit risk in leasing industry

    Directory of Open Access Journals (Sweden)

    Gholamreza Farsad Amanollahi

    2016-03-01

    Full Text Available Credit risk consists of probability of non-return, which may be in the form of bankruptcy or a decrease in financial and credit situation of the lessee. The variables are extracted from the Central Bank. In this study the independent variables are measured with six factors that are called external factors. The external factors are size of leasing, ownership interest rate, foreign exchange, inflation, and Gross Domestic Product (GDP. The present study uses related observations from 31 leasing companies from 2008 to 2013 to find out the determinants of the credit risk. The combined evidences suggest that internal factors such as upfront prepayment, credit insurance contract, security deposits, time and period contract, collateral and guarantees, contract amount, as well as external factors such as interest rate, inflation, foreign exchange, Gross Domestic Product infrastructure, and credit risk are determinants in the policy-making process involving the industrial leasing. Furthermore, the empirical results indicate the size of leasing and ownership are not the significant determinants of credit risk. The results of this dissertation provide several implications for policy-makers in the leasing industry. Policy-makers will be better off employing different procedures for leasing activities in the leasing industry.

  10. IMPACT OF THE GLOBAL FINANCIAL CRISIS ON THE CREDIT RISK MANAGEMENT IN A BANK

    Directory of Open Access Journals (Sweden)

    Jerzy Piotr Gwizdała

    2016-06-01

    Full Text Available The main purpose of this article is to present the role of risk in the activity of a commercial bank with particular reference to the global financial crisis. The introductory part presents the origins of economic crises, especially the contemporary crisis from 2007-2010, which began in the United States subprime mortgage market. Dating back to the 1831, considerations allow to undetstand the causes of the crises. Then the impact of the global financial crisis on the scale of the crediting activities of banks in Poland was analyzed, presenting a credit portfolio structure, with a particular focus on the structure of loans to households and enterprises. In the second part of the article the process of credit risk management was discussed, paying attention to the crucial role of the bank's credit policy, and the conditions and prospects of commercial bank credit activity development were specified. It presents also the criteria for the proper credit management, indicating as the optimal solution the development of the so-called „credit textbook”.

  11. Credit risk in the pool-implications for private capital investments in Brazilian power generation

    International Nuclear Information System (INIS)

    Rocha, Katia; Alcaraz Garcia, Francisco A.

    2006-01-01

    The new Brazilian Electric Sector Regulation of 2004 introduced two negotiation markets: the regulated pool and the free market. Competition in the pool is enforced via energy auctions, where the winning generator has to sign long-term power purchase agreements simultaneously with all distributors at the bidding-price. To estimate the appropriate credit risk spread of the pool, we implement a clustering methodology to rank and rate the distributors. The results show an average spread between 5.75% and 8.5%, which corresponds to a credit rating of B- according to the spreads available in Reuters 2004. This estimation is at least 208 basis points higher than the credit rating Ba1/BB+ assigned to the distributors by the National Electric Energy Agency (ANEEL) in the periodic tariff revisions. Distributors with higher risk/spread are located in the South-Southeast, compared to the low risk/spread ones concentrated in the North-Northeast. We estimate the opportunity cost of capital in real terms in the range of 13-16% to account for the credit risk of the pool. Essential to determine the bidding price at the auctions, this estimation is higher than the 11.26% opportunity cost estimated by ANEEL. The pool's credit risk has to be taken into consideration, especially for compensating new private capital investments in Brazilian power generation

  12. 75 FR 2723 - Fair Credit Reporting Risk-Based Pricing Regulations

    Science.gov (United States)

    2010-01-15

    ...-based pricing notice to a consumer when the creditor uses a consumer report to grant or extend credit to... consumers to combat identity theft, increase the accuracy of consumer reports, and allow consumers to... consumer report is often used in evaluating the risk posed by the consumer. Creditors that engage in risk...

  13. The Effect of Graduation Coaches and Credit Recovery Programs on the Dropout Rate of At-Risk Grade 9 Students

    Science.gov (United States)

    Bowling, Jan

    2013-01-01

    The objective of this study was to identify the characteristics of effective graduation coaches (GCs) and credit recovery programs and explain the influence of a GC and a credit recovery program on Grade 9 students at risk of dropping out. The purpose of this study was to determine whether a high school GC and enrollment in a credit recovery…

  14. Credit risk transfer activities and systemic risk : How banks became less risky individually but posed greater risks to the financial system at the same time

    NARCIS (Netherlands)

    Wagner, W.B.; Nijskens, R.G.M.

    2011-01-01

    A main cause of the crisis of 2007–2009 is the various ways through which banks have transferred credit risk in the financial system. We study the systematic risk of banks before the crisis, using two samples of banks respectively trading Credit Default Swaps (CDS) and issuing Collateralized Loan

  15. MANAGEMENT OF CREDIT LOSSES

    Directory of Open Access Journals (Sweden)

    Natalya P. Anoshkina

    2018-06-01

    Full Text Available The paper is devoted to the problem of credit loss management topical for modern Russian science and banking practice. The bank’s lending activity is an integral and the most profitable sphere of banking activity. Banks need to take credit risks inherent in their core business and minimize their impact through the establishment of advanced risk management systems. The study, reflected in the present paper, has been conducted in order to determine approaches to the organization of credit loss management in banking. Analysis of the system of management of credit risks and credit losses has shown that they have different scope, object and purpose. In this connection, there is an objective necessity to create a special subsystem for the management of credit losses in banks. On the basis of common bank approaches to credit risk management, the paper develops models of credit loss management: a multi-level management model in the area of ‘operational-tactical-strategic management’ and a functional management model in the area of ‘technology-execution-control’. These models are important for the modern theory and practice of banking, as they allow the bank to manage credit losses on the entire time horizon of the management process, thus opening a wide range of opportunities for the creation and implementation of large-scale programs, as well as specific techniques. This study allows drawing a conclusion about the need to consider control credit losses as a strictly regulated multi-level process, in which each division is assigned with specific objectives, tasks, functions, formally enshrined in the relevant lists, job descriptions and other legal documents.

  16. The Impact of the FOMC's Monetary Policy Actions on the growth of Credit Risk: the Monetary Policy - Liquidity Paradox

    OpenAIRE

    Kwamie Dunbar

    2008-01-01

    Credit risk is influenced by interest rates and market liquidity. This paper examines the direct and indirect impacts of unexpected monetary policy shifts on the growth of corporate credit risk, with the aim of quantifying the size and direction of the response. The results surprisingly indicate that monetary policy and liquidity impulses move counter to each other in their effects on credit risk ("The monetary policy-liquidity paradox"). The analysis indicates that while contractionary monet...

  17. FINANCIAL RISK IN CREDITS TO THE CONSUMPTION OF THE VENEZUELAN BANKING SYSTEM 2008-2015

    Directory of Open Access Journals (Sweden)

    Carlos Manuel Díaz

    2017-07-01

    Full Text Available The objective of this research was to analyze the financial risk in the consumption credits of the banking system of Venezuela between 2008-2015. The theoretical support was made based on Cóndor & Cajamarca (2014, monitoring credit risk is essential to preserve the stability of the financial system. The type of research was descriptive with a longitudinal trend design. Consumer loans accounted for 21% of the banking economy; these loans grew at an annual average of 17%, the delinquency and total portfolio coverage indicators showed a downward trend. This shows that the profile of potential borrowers by banks has been successful.

  18. Willingness to Overpay for Insurance and for Consumer Credit: Search and Risk Behavior Under Price Dispersion

    Directory of Open Access Journals (Sweden)

    Sergey MALAKHOV

    2014-11-01

    Full Text Available When income growth under price dispersion reduces the time of search and raises prices of purchases, the increase in purchase price can be presented as the increase in the willingness to pay for insurance or the willingness to pay for consumer credit. The optimal consumer decision represents the trade-off between the propensity to search for beneficial insurance or consumer credit, and marginal savings on insurance policy or consumer credit. Under price dispersion the indirect utility function takes the form of cubic parabola, where the risk aversion behavior ends at the saddle point of the comprehensive insurance or the complete consumer credit. The comparative static analysis of the saddle point of the utility function discovers the ambiguity of the departure from risk-neutrality. This ambiguity can produce the ordinary risk seeking behavior as well as mathematical catastrophes of Veblen-effect’s imprudence and over prudence of family altruism. The comeback to risk aversion is also ambiguous and it results either in increasing or in decreasing relative risk aversion. The paper argues that the decreasing relative risk aversion comes to the optimum quantity of money.

  19. Analysis of The Influence of Liquidity, Credit and Operational Risk, in Indonesian Islamic Bank’s Financing for The Period 2007-2013

    Directory of Open Access Journals (Sweden)

    Ousmane Diallo

    2015-12-01

    Full Text Available The purpose of this paper is to analyze the influence of credit, liquidity and operational risks in six Indonesian’s islamic banking financing products namely mudharabah, musyarakah, murabahah, istishna, ijarah and qardh, in order to try to discover whether or not Indonesian islamic banking is based on the “risk-sharing” system. This paper relies on a fixed effect model test based on the panel data analysis method, focusing on the period from 2007 to 2013. The research is an exploratory and descriptive study of all the Indonesian islamic banks that were operating in 2013. The results of this study show that the Islamic banking system in Indonesia truly has banking products based on “risk-sharing.” We found out that credit, operational and liquidity risks as a whole, have significant influence on mudarabah, musyarakah, murabahah, istishna, ijarah and qardh based financing. There is a correlation between the credit risk and mudarabah based financing, and no causal relationship between the credit risk and musharaka, murabahah, ijarah, istishna and qardh based financing. There is also correlation between the operational risk and mudarabah and murabahah based financing, and no causal relationship between the operational risk and musharaka, istishna, ijarah and qardh based financing. There is correlation between the liquidity risk and istishna based financing, and no causal relationship between the liquidity risk and musharaka, mudarabah, murabahah, ijarah and qardh based financing. A major implication of this study is the fact that there is no causal relationship between the credit risk and musharakah based financing, which is the mode of financing where the islamic bank shares the risk with its clients, but there is an influence of credit risk toward mudarabah mode financing, a financing mode where the Islamic bank bears all the risk. These findings can lead us to conclude that the Indonesian Islamic banking sector is based on the “risk

  20. A user credit assessment model based on clustering ensemble for broadband network new media service supervision

    Science.gov (United States)

    Liu, Fang; Cao, San-xing; Lu, Rui

    2012-04-01

    This paper proposes a user credit assessment model based on clustering ensemble aiming to solve the problem that users illegally spread pirated and pornographic media contents within the user self-service oriented broadband network new media platforms. Its idea is to do the new media user credit assessment by establishing indices system based on user credit behaviors, and the illegal users could be found according to the credit assessment results, thus to curb the bad videos and audios transmitted on the network. The user credit assessment model based on clustering ensemble proposed by this paper which integrates the advantages that swarm intelligence clustering is suitable for user credit behavior analysis and K-means clustering could eliminate the scattered users existed in the result of swarm intelligence clustering, thus to realize all the users' credit classification automatically. The model's effective verification experiments are accomplished which are based on standard credit application dataset in UCI machine learning repository, and the statistical results of a comparative experiment with a single model of swarm intelligence clustering indicates this clustering ensemble model has a stronger creditworthiness distinguishing ability, especially in the aspect of predicting to find user clusters with the best credit and worst credit, which will facilitate the operators to take incentive measures or punitive measures accurately. Besides, compared with the experimental results of Logistic regression based model under the same conditions, this clustering ensemble model is robustness and has better prediction accuracy.

  1. Markov Chain Model with Catastrophe to Determine Mean Time to Default of Credit Risky Assets

    Science.gov (United States)

    Dharmaraja, Selvamuthu; Pasricha, Puneet; Tardelli, Paola

    2017-11-01

    This article deals with the problem of probabilistic prediction of the time distance to default for a firm. To model the credit risk, the dynamics of an asset is described as a function of a homogeneous discrete time Markov chain subject to a catastrophe, the default. The behaviour of the Markov chain is investigated and the mean time to the default is expressed in a closed form. The methodology to estimate the parameters is given. Numerical results are provided to illustrate the applicability of the proposed model on real data and their analysis is discussed.

  2. 17 CFR 240.15c3-1f - Optional market and credit risk requirements for OTC derivatives dealers (Appendix F to 17 CFR...

    Science.gov (United States)

    2010-04-01

    ... charges for market and credit risk pursuant to this Appendix F in lieu of computing securities haircuts...)(2)(vi). Credit Risk (d) The capital charge for credit risk arising from an OTC derivatives dealer's... 17 Commodity and Securities Exchanges 3 2010-04-01 2010-04-01 false Optional market and credit...

  3. Why credit risk markets are predestined for exhibiting log-periodic power law structures

    Science.gov (United States)

    Wosnitza, Jan Henrik; Leker, Jens

    2014-01-01

    Recent research has established the existence of log-periodic power law (LPPL) patterns in financial institutions’ credit default swap (CDS) spreads. The main purpose of this paper is to clarify why credit risk markets are predestined for exhibiting LPPL structures. To this end, the credit risk prediction of two variants of logistic regression, i.e. polynomial logistic regression (PLR) and kernel logistic regression (KLR), are firstly compared to the standard logistic regression (SLR). In doing so, the question whether the performances of rating systems based on balance sheet ratios can be improved by nonlinear transformations of the explanatory variables is resolved. Building on the result that nonlinear balance sheet ratio transformations hardly improve the SLR’s predictive power in our case, we secondly compare the classification performance of a multivariate SLR to the discriminative powers of probabilities of default derived from three different capital market data, namely bonds, CDSs, and stocks. Benefiting from the prompt inclusion of relevant information, the capital market data in general and CDSs in particular increasingly outperform the SLR while approaching the time of the credit event. Due to the higher classification performances, it seems plausible for creditors to align their investment decisions with capital market-based default indicators, i.e., to imitate the aggregate opinion of the market participants. Since imitation is considered to be the source of LPPL structures in financial time series, it is highly plausible to scan CDS spread developments for LPPL patterns. By establishing LPPL patterns in governmental CDS spread trajectories of some European crisis countries, the LPPL’s application to credit risk markets is extended. This novel piece of evidence further strengthens the claim that credit risk markets are adequate breeding grounds for LPPL patterns.

  4. Efficient Estimation of Sensitivities for Counterparty Credit Risk with the Finite Difference Monte Carlo Method

    NARCIS (Netherlands)

    de Graaf, C.S.L.; Kandhai, D.; Sloot, P.M.A.

    According to Basel III, financial institutions have to charge a credit valuation adjustment (CVA) to account for a possible counterparty default. Calculating this measure and its sensitivities is one of the biggest challenges in risk management. Here, we introduce an efficient method for the

  5. Efficient estimation of sensitivities for counterparty credit risk with the finite difference Monte Carlo method

    NARCIS (Netherlands)

    C.S.L. de Graaf (Kees); B.D. Kandhai; P.M.A. Sloot

    2017-01-01

    htmlabstractAccording to Basel III, financial institutions have to charge a credit valuation adjustment (CVA) to account for a possible counterparty default. Calculating this measure and its sensitivities is one of the biggest challenges in risk management. Here, we introduce an efficient method

  6. Do At-Risk Students Benefit When NovaNET Is Used for Credit Recovery?

    Science.gov (United States)

    Volkerding, Rebecca Lynn

    2012-01-01

    The purpose of this study was to determine if it is effective and appropriate to place all students needing credit recovery in computer-based classes regardless of age, risk ratio, and their previous failing grade. Driven by the NCLB mandate for schools to produce greater gains and graduate all students in 4.5 years, districts are now using online…

  7. Sustaining Satisfaction for Credit Risk Governance: Empirical Evidence from Indian Commercial Banks

    Science.gov (United States)

    Arora, Anju

    2015-01-01

    This paper explores the issues underlying the credit risk governance mechanism of banking institutions in emerging economies. This is an important area of study given the essential role that banks play in the financial markets of emerging economies and the widespread banking reforms that these economies have implemented. The aim of this study is…

  8. P2P Network Lending, Loss Given Default and Credit Risks

    Directory of Open Access Journals (Sweden)

    Guangyou Zhou

    2018-03-01

    Full Text Available Peer-to-peer (P2P network lending is a new mode of internet finance that still holds credit risk as its main risk. According to the internal rating method of the New Basel Accord, in addition to the probability of default, loss given default is also one of the important indicators of evaluation credit risks. Proceeding from the perspective of loss given default (LGD, this paper conducts an empirical study on the probability distribution of LGDs of P2P as well as its influencing factors with the transaction data of Lending Club. The results show that: (1 the LGDs of P2P loans presents an obvious unimodal distribution, the peak value is relatively high and tends to concentrate with the decrease of the borrower’s credit rating, indicating that the distribution of LGDs of P2P lending is similar to that of unsecured bonds; (2 The total asset of the borrower has no significant impact on LGD, the credit rating and the debt-to-income ratio exert a significant negative impact, while the term and amount of the loan produce a relatively strong positive impact. Therefore, when evaluating the borrower’s repayment ability, it is required to pay more attention to its assets structure rather than the size of its total assets. When carrying out risk control for the P2P platform, it is necessary to give priority to the control of default rate.

  9. Credit networks and systemic risk of Chinese local financing platforms: Too central or too big to fail?. -based on different credit correlations using hierarchical methods

    Science.gov (United States)

    He, Fang; Chen, Xi

    2016-11-01

    The accelerating accumulation and risk concentration of Chinese local financing platforms debts have attracted wide attention throughout the world. Due to the network of financial exposures among institutions, the failure of several platforms or regions of systemic importance will probably trigger systemic risk and destabilize the financial system. However, the complex network of credit relationships in Chinese local financing platforms at the state level remains unknown. To fill this gap, we presented the first complex networks and hierarchical cluster analysis of the credit market of Chinese local financing platforms using the ;bottom up; method from firm-level data. Based on balance-sheet channel, we analyzed the topology and taxonomy by applying the analysis paradigm of subdominant ultra-metric space to an empirical data in 2013. It is remarked that we chose to extract the network of co-financed financing platforms in order to evaluate the effect of risk contagion from platforms to bank system. We used the new credit similarity measure by combining the factor of connectivity and size, to extract minimal spanning trees (MSTs) and hierarchical trees (HTs). We found that: (1) the degree distributions of credit correlation backbone structure of Chinese local financing platforms are fat tailed, and the structure is unstable with respect to targeted failures; (2) the backbone is highly hierarchical, and largely explained by the geographic region; (3) the credit correlation backbone structure based on connectivity and size is significantly heterogeneous; (4) key platforms and regions of systemic importance, and contagion path of systemic risk are obtained, which are contributed to preventing systemic risk and regional risk of Chinese local financing platforms and preserving financial stability under the framework of macro prudential supervision. Our approach of credit similarity measure provides a means of recognizing ;systemically important; institutions and regions

  10. Credit Default Risk and its Determinants of Microfinance Industry in ...

    African Journals Online (AJOL)

    user

    limitations prevailed in the selected 6 MFIs in Ethiopia schemed by determining the ... the probit model show that education, income, loan supervision, suitability of repayment ..... of Ethiopia as Large, Medium, and Small MFIs. ..... /sigma. 0.5177089. 0.0467682. *significant at 1%. ***significant at 10% .... businesses default.

  11. Current Approaches to the Establishment of Credit Risk Specific Provisions

    Directory of Open Access Journals (Sweden)

    Ion Nitu

    2008-10-01

    Full Text Available The aim of the new Basel II and IFRS approaches is to make the operations of financial institutions more transparent and thus to create a better basis for the market participants and supervisory authorities to acquire information and make decisions. In the banking sector, a continuous debate is being led, related to the similarities and differences between IFRS approach on loan loss provisions and Basel II approach on calculating the capital requirements, judging against the classical method regarding loan provisions, currently used by the Romanian banks following the Central Bank’s regulations.Banks must take into consideration that IFRS and Basel II objectives are fundamentally different. While IFRS aims to ensure that the financial papers reflect adequately the losses recorded at each balance sheet date, the Basel II objective is to ensure that the bank has enough provisions or capital in order to face expected losses in the next 12 months and eventual unexpected losses.Consequently, there are clear differences between the objectives of the two models. Basel II works on statistical modeling of expected losses while IFRS, although allowing statistical models, requires a trigger event to have occurred before they can be used. IAS 39 specifically states that losses that are expected as a result of future events, no matter how likely, are not recognized. This is a clear and fundamental area of difference between the two frameworks.

  12. EFFECTS OF TRUST FUND MODEL CREDIT INTERVENTION ON ...

    African Journals Online (AJOL)

    IBUKUN

    Agricultural credit encompasses all loans and advances granted to borrowers to finance ... Governmental Organizations (NGOs) place funds in trust with lending banks to augment the small ..... AJFAND online Scholarly Peer Reviewed, 12 (3).

  13. A Model Fit Statistic for Generalized Partial Credit Model

    Science.gov (United States)

    Liang, Tie; Wells, Craig S.

    2009-01-01

    Investigating the fit of a parametric model is an important part of the measurement process when implementing item response theory (IRT), but research examining it is limited. A general nonparametric approach for detecting model misfit, introduced by J. Douglas and A. S. Cohen (2001), has exhibited promising results for the two-parameter logistic…

  14. An application of locally linear model tree algorithm with combination of feature selection in credit scoring

    Science.gov (United States)

    Siami, Mohammad; Gholamian, Mohammad Reza; Basiri, Javad

    2014-10-01

    Nowadays, credit scoring is one of the most important topics in the banking sector. Credit scoring models have been widely used to facilitate the process of credit assessing. In this paper, an application of the locally linear model tree algorithm (LOLIMOT) was experimented to evaluate the superiority of its performance to predict the customer's credit status. The algorithm is improved with an aim of adjustment by credit scoring domain by means of data fusion and feature selection techniques. Two real world credit data sets - Australian and German - from UCI machine learning database were selected to demonstrate the performance of our new classifier. The analytical results indicate that the improved LOLIMOT significantly increase the prediction accuracy.

  15. Two-echelon competitive integrated supply chain model with price and credit period dependent demand

    Science.gov (United States)

    Pal, Brojeswar; Sankar Sana, Shib; Chaudhuri, Kripasindhu

    2016-04-01

    This study considers a two-echelon competitive supply chain consisting of two rivaling retailers and one common supplier with trade credit policy. The retailers hope that they can enhance their market demand by offering a credit period to the customers and the supplier also offers a credit period to the retailers. We assume that the market demand of the products of one retailer depends not only on their own market price and offering a credit period to the customers, but also on the market price and offering a credit period of the other retailer. The supplier supplies the product with a common wholesale price and offers the same credit period to the retailers. We study the model under a centralised (integrated) case and a decentralised (Vertical Nash) case and compare them numerically. Finally, we investigate the model by the collected numerical data.

  16. Stepwise Analysis of Differential Item Functioning Based on Multiple-Group Partial Credit Model.

    Science.gov (United States)

    Muraki, Eiji

    1999-01-01

    Extended an Item Response Theory (IRT) method for detection of differential item functioning to the partial credit model and applied the method to simulated data using a stepwise procedure. Then applied the stepwise DIF analysis based on the multiple-group partial credit model to writing trend data from the National Assessment of Educational…

  17. An Extension of the Partial Credit Model with an Application to the Measurement of Change.

    Science.gov (United States)

    Fischer, Gerhard H.; Ponocny, Ivo

    1994-01-01

    An extension to the partial credit model, the linear partial credit model, is considered under the assumption of a certain linear decomposition of the item x category parameters into basic parameters. A conditional maximum likelihood algorithm for estimating basic parameters is presented and illustrated with simulation and an empirical study. (SLD)

  18. An Introduction to the Partial Credit Model for Developing Nursing Assessments.

    Science.gov (United States)

    Fox, Christine

    1999-01-01

    Demonstrates how the partial credit model, a variation of the Rasch Measurement Model, can be used to develop performance-based assessments for nursing education. Applies the model using the Practical Knowledge Inventory for Nurses. (SK)

  19. Supply Chain Model with Stochastic Lead Time, Trade-Credit Financing, and Transportation Discounts

    Directory of Open Access Journals (Sweden)

    Sung Jun Kim

    2017-01-01

    Full Text Available This model extends a two-echelon supply chain model by considering the trade-credit policy, transportations discount to make a coordination mechanism between transportation discounts, trade-credit financing, number of shipments, quality improvement of products, and reduced setup cost in such a way that the total cost of the whole system can be reduced, where the supplier offers trade-credit-period to the buyer. For buyer, the backorder rate is considered as variable. There are two investments to reduce setup cost and to improve quality of products. The model assumes lead time-dependent backorder rate, where the lead time is stochastic in nature. By using the trade-credit policy, the model gives how the credit-period would be determined to achieve the win-win outcome. An iterative algorithm is designed to obtain the global optimum results. Numerical example and sensitivity analysis are given to illustrate the model.

  20. 76 FR 79379 - Risk-Based Capital Guidelines: Market Risk; Alternatives to Credit Ratings for Debt and...

    Science.gov (United States)

    2011-12-21

    ..., China, France, Germany, Hong Kong SAR, India, Indonesia, Italy, Japan, Korea, Luxembourg, Mexico, the..., the legislative history of section 939A focuses on the conflicts of interest of credit rating agencies... illustrates how CDS spreads and CRCs could be used together to assign specific risk-weighting factors. In...

  1. WERE OIL PRICE MARKETS THE SOURCE OF CREDIT CRISIS IN EUROPEAN COUNTRIES? EVIDENCE USING A VAR-MGARCH-DCC MODEL

    Directory of Open Access Journals (Sweden)

    Nadhem Selmi

    2014-04-01

    Full Text Available This paper examines the role of oil prices, credit, financial and commercial linkages in the propagation of industrial market crises during the period 2004-2012. Using VAR-MGARCH-DCC model regressions on seven markets finds that credit linkage played a significant role in the subprime, financial and global crises. Our results also show that the European debt crisis has already spread like a crisis from oil prices to Ireland and Portugal, and other countries are now at risk: Spain is a probable candidate for financial crisis.

  2. Rating agencies : Role and influence of their sovereign credit risk assessment in the Eurozone

    NARCIS (Netherlands)

    Eijffinger, S.C.W.

    2012-01-01

    In this article, the role of credit rating agencies (CRAs) during the 2010–11 EU sovereign debt crisis is assessed. It is concluded that rating agencies lag behind markets, that their business model is flawed, and that the lack of competition renders the big three CRAs with too strong a market

  3. THE STEERING TOOL OF FINANCIAL INSTITUTIONS: CREDIT VAR (VALUE AT RISK

    Directory of Open Access Journals (Sweden)

    BĂRBULESCU MARINELA

    2015-04-01

    Full Text Available In order to determine the economic capital, in terms of internal management or of application of regulations, financial institutions need to model the probability of future losses on a loan portfolio. This is generally made applying the Credit VaR method. Thus, unexpected losses can be assessed.

  4. Credit Recovery in a Virtual School: Affordances of Online Learning for the At-Risk Student

    Science.gov (United States)

    Oliver, Kevin; Kellogg, Shaun

    2015-01-01

    This paper summarizes evaluation findings about a high school credit recovery (CR) program as solicited by a statesponsored virtual school in the United States. Student and teacher surveys explained why CR students failed previous instances of face-to-face courses and defined how the online CR model helped these learners overcome both internal…

  5. The Term Structure of Credit Spreads on Euro Corporate Bonds

    NARCIS (Netherlands)

    van Landschoot, A.

    2003-01-01

    Although there is a broad literature on structural credit risk models, there has been little empirical testing of these models.In this paper we examine the term structure of credit spreads on euro corporate bonds and the empirical validation of structural credit risk models.The latter provide a

  6. Rare disasters, credit, and option market puzzles

    DEFF Research Database (Denmark)

    Christoffersen, Peter; Du, Du; Elkamhi, Redouane

    2017-01-01

    calibrated to the real economy can simultaneously explain several key empirical regularities in equity, credit, and options markets. Our model captures the empirical level and volatility of credit spreads, generates a flexible credit risk term structure, and provides a good fit to a century of observed...

  7. Rare Disasters and Credit Market Puzzles

    DEFF Research Database (Denmark)

    Christoffersen, Peter; Du, Du; Elkamhi, Redouane

    to the real economy and not to bond prices can simultaneously explain several key empirical regularities in credit markets. Our model captures the empirical level and volatility of credit spreads, generates a flexible credit risk term structure, and provides a good fit to a century of observed spreads...

  8. THE MANAGEMENT OF CREDIT RISK ACCORDING TO INTERNAL RATINGS- BASED APPROACH

    Directory of Open Access Journals (Sweden)

    BOLOCAN DRAGOS-MIHAIL

    2010-12-01

    Full Text Available The internal ratings based approach (IRB Approach was created as part of Basel II replacing the original Basle Accord of 1988 (Basle I in an effort to create a better framework for regulating bank capital. This paper covers the methodology and components of the IRB Approach used to determine capital requirements for credit risk. Such an approach, which relies heavily upon a banks internal assessment of its counterparties and exposures, can secure two key objectives consistent with those which support the wider review of The New Basel Capital Accord.. IRB approach should promote safety and soundness in the financial system and, consistent with providing incentive compatibility, that the structure and requirements of the IRB approach do not impinge upon or undermine banks well-established lending and credit risk management practices

  9. The Application of DEA Method in Evaluating Credit Risk of Companies

    Directory of Open Access Journals (Sweden)

    Anna Feruś

    2010-12-01

    Full Text Available The subject of the present article is a new procedure forecasting credit risk of companies in Polish economy environment. What favors the suggested approach is the fact that in Poland, unlike in western countries, DEA method has not yet been implemented in order to assess credit risk that companies face. The research described in the article has been conducted on the basis of comparison of suggested DEA method with currently used procedures, namely point method, discriminative analysis and linear regression. Considering the research, it can be concluded that DEA method facilitates forecasting financial problems, including bankruptcy of companies in Polish economic conditions, and its effectiveness is comparable or even greater than approaches implemented so far.  

  10. Islamic Credit Risk Analysis Case Of Sudanese Banking Sector 2006-2014

    Directory of Open Access Journals (Sweden)

    Mohammed A. SirElkhatim

    2017-06-01

    Full Text Available Islamic banking system has been expanding so quickly over the past few years. Moreover it has been developing significantly around the non-Muslim territories including Middle Eastern countries Southeast Asian countries and European countries and even in North American countries. The existing of Islamic banks is to attract the customers who seek to avoid interest. The prediction of corporate bankruptcies is an Important and widely studied topic since it can have significant impact on bank lending decisions and profitability the ultimate purpose of credit risk management is to ensure that credit fund is of safety profitability and fluidity. At present it is extremely important of commercial banks to set up an early bank risk warning system.

  11. Evaluation of creditability and risk minimisation : The effect of accounting for intangibles

    OpenAIRE

    Lukiyanov, Artem

    2005-01-01

    The recent history knows numerous examples of creditor’s inability to evaluate financial solvency of the client correctly. Creditors’ risks do not only concern individual relations between the two parties but the economy in general. The standard loan-giving procedure considers evaluation based on a number of financial ratios. Using the standard method a company that in reality is creditable may sometimes be counted as insolvent by the bank – due to the structure of the balance sheet, for inst...

  12. Comparison of different methods of credit risk management of the commercial bank to accelerate lending activities for SME segment

    OpenAIRE

    Cipovová, Eva; Dlasková, Gabriela

    2016-01-01

    The contribution is dealing with selected assessments of the most important risk in the banking sector in the Czech Republic. The aim of this article was to quantify capital requirement for individual methodologies of credit risk management on the designed portfolio with corporate loans with use of collateral using collaterals as techniques to reduce credit risk of commercial bank. Firstly, the aim of this article is to quantify the capital requirements using the Internal Rating Based Approac...

  13. Credit card debt, stress and key health risk behaviors among college students.

    Science.gov (United States)

    Nelson, Melissa C; Lust, Katherine; Story, Mary; Ehlinger, Ed

    2008-01-01

    To examine cross-sectional associations between credit card debt, stress, and health risk behaviors among college students, focusing particularly on weight-related behaviors. Random-sample, mailed survey. Undergraduate and graduate students (n = 3206) attending a large public university. Self-reported health indicators (e.g., weight, height, physical activity, diet, weight control, stress, credit card debt). More than 23% of students reported credit card debt > or = $1000. Using Poisson regression to predict relative risks (RR) of health behaviors, debt of at least $1000 was associated with nearly every risk indicator tested, including overweight/obesity, insufficient physical activity, excess television viewing, infrequent breakfast consumption, fast food consumption, unhealthy weight control, body dissatisfaction, binge drinking, substance use, and violence. For example, adjusted RR [ARR] ranged from 1.09 (95% Confidence interval [CI]: 1.02-1.17) for insufficient vigorous activity to 2.17 (CI: 0.68-2.82) for using drugs other than marijuana in the past 30 days. Poor stress management was also a robust indicator of health risk. University student lifestyles may be characterized by a variety of coexisting risk factors. These findings indicate that both debt and stress were associated with wide-ranging adverse health indicators. Intervention strategies targeting at-risk student populations need to be tailored to work within the context of the many challenges of college life, which may serve as barriers to healthy lifestyles. Increased health promotion efforts targeting stress, financial management, and weight-related health behaviors may be needed to enhance wellness among young adults.

  14. Assessing the Credit Risk of Corporate Bonds Based on Factor Analysis and Logistic Regress Analysis Techniques: Evidence from New Energy Enterprises in China

    Directory of Open Access Journals (Sweden)

    Yuanxin Liu

    2018-05-01

    Full Text Available In recent years, new energy sources have ushered in tremendous opportunities for development. The difficulties to finance new energy enterprises (NEEs can be estimated through issuing corporate bonds. However, there are few scientific and reasonable methods to assess the credit risk of NEE bonds, which is not conducive to the healthy development of NEEs. Based on this, this paper analyzes the advantages and risks of NEEs issuing bonds and the main factors affecting the credit risk of NEE bonds, constructs a hybrid model for assessing the credit risk of NEE bonds based on factor analysis and logistic regress analysis techniques, and verifies the applicability and effectiveness of the model employing relevant data from 46 Chinese NEEs. The results show that the main factors affecting the credit risk of NEE bonds are internal factors involving the company’s profitability, solvency, operational ability, growth potential, asset structure and viability, and external factors including macroeconomic environment and energy policy support. Based on the empirical results and the exact situation of China’s NEE bonds, this article finally puts forward several targeted recommendations.

  15. Analysis of credit linked demand in an inventory model with varying ordering cost.

    Science.gov (United States)

    Banu, Ateka; Mondal, Shyamal Kumar

    2016-01-01

    In this paper, we have considered an economic order quantity model for deteriorating items with two-level trade credit policy in which a delay in payment is offered by a supplier to a retailer and also an another delay in payment is offered by the retailer to his/her all customers. Here, it is proposed that the demand function is dependent on the length of the customer's credit period and also the duration of offering the credit period. In this article, it is considered that the retailer's ordering cost per order depends on the number of replenishment cycles. The objective of this model is to establish a deterministic EOQ model of deteriorating items for the retailer to decide the position of customers credit period and the number of replenishment cycles in finite time horizon such that the retailer gets the maximum profit. Also, the model is explained with the help of some numerical examples.

  16. Financial Innovation, the Discovery of Risk, and the U.S. Credit Crisis

    OpenAIRE

    Enrique G. Mendoza; Emine Boz

    2010-01-01

    Financial innovation and overconfidence about asset values and the riskiness of new financial products were important factors behind the U.S. credit crisis. We show that a boom-bust cycle in debt, asset prices and consumption characterizes the equilibrium dynamics of a model with a collateral constraint in which agents learn \\by observation" the true riskiness of a new financial environment. Early realizations of states with high ability to leverage assets into debt turn agents overly optimis...

  17. The effect of the subprime crisis on the credit risk in global scale

    Science.gov (United States)

    Lee, Sangwook; Kim, Min Jae; Lee, Sun Young; Kim, Soo Yong; Ban, Joon Hwa

    2013-05-01

    Credit default swap (CDS) has become one of the most actively traded credit derivatives, and its importance in finance markets has increased after the subprime crisis. In this study, we analyzed the correlation structure of credit risks embedded in CDS and the influence of the subprime crisis on this topological space. We found that the correlation was stronger in the cluster constructed according to the location of the CDS reference companies than in the one constructed according to their industries. The correlation both within a given cluster and between different clusters became significantly stronger after the subprime crisis. The causality test shows that the lead lag effect between the portfolios (into which reference companies are grouped by the continent where each of them is located) is reversed in direction because the portion of non-investable and investable reference companies in each portfolio has changed since then. The effect of a single impulse has increased and the response time relaxation has become prolonged after the crisis as well.

  18. An Application of Robust Method in Multiple Linear Regression Model toward Credit Card Debt

    Science.gov (United States)

    Amira Azmi, Nur; Saifullah Rusiman, Mohd; Khalid, Kamil; Roslan, Rozaini; Sufahani, Suliadi; Mohamad, Mahathir; Salleh, Rohayu Mohd; Hamzah, Nur Shamsidah Amir

    2018-04-01

    Credit card is a convenient alternative replaced cash or cheque, and it is essential component for electronic and internet commerce. In this study, the researchers attempt to determine the relationship and significance variables between credit card debt and demographic variables such as age, household income, education level, years with current employer, years at current address, debt to income ratio and other debt. The provided data covers 850 customers information. There are three methods that applied to the credit card debt data which are multiple linear regression (MLR) models, MLR models with least quartile difference (LQD) method and MLR models with mean absolute deviation method. After comparing among three methods, it is found that MLR model with LQD method became the best model with the lowest value of mean square error (MSE). According to the final model, it shows that the years with current employer, years at current address, household income in thousands and debt to income ratio are positively associated with the amount of credit debt. Meanwhile variables for age, level of education and other debt are negatively associated with amount of credit debt. This study may serve as a reference for the bank company by using robust methods, so that they could better understand their options and choice that is best aligned with their goals for inference regarding to the credit card debt.

  19. Sovereign Credit Risk and Stock Markets–Does the Markets’ Dependency Increase with Financial Distress?

    Directory of Open Access Journals (Sweden)

    Paulo Pereira da Silva

    2014-03-01

    Full Text Available This paper addresses the relationship between stock markets and credit default swaps (CDS markets. In particular, I aim to gauge if the co-movement between stock prices and sovereign CDS spreads increases with the deterioration of the credit quality of sovereign debt. The analysis of correlations, Granger causality, cointegration, and the results of an error-correction model represented in a state space form show a close link between these markets, but do not evidence that the co-movement increases in periods of financial distress. I also analyze the transmission of volatility between the two markets. The results do not support the hypothesis that volatility propagation surges during financial distress periods. On the contrary, for some cases, the data suggests that the lead-lag relationships between the two markets volatility are stronger during stable periods.

  20. A Comparison of Graded Response and Rasch Partial Credit Models with Subjective Well-Being.

    Science.gov (United States)

    Baker, John G.; Rounds, James B.; Zevon, Michael A.

    2000-01-01

    Compared two multiple category item response theory models using a data set of 52 mood terms with 713 undergraduate psychology students. Comparative model fit for the Samejima (F. Samejima, 1966) logistic model for graded responses and the Masters (G. Masters, 1982) partial credit model favored the former model for this data set. (SLD)

  1. Binomial model for measuring expected credit losses from trade receivables in non-financial sector entities

    Directory of Open Access Journals (Sweden)

    Branka Remenarić

    2018-01-01

    Full Text Available In July 2014, the International Accounting Standards Board (IASB published International Financial Reporting Standard 9 Financial Instruments (IFRS 9. This standard introduces an expected credit loss (ECL impairment model that applies to financial instruments, including trade and lease receivables. IFRS 9 applies to annual periods beginning on or after 1 January 2018 in the European Union member states. While the main reason for amending the current model was to require major banks to recognize losses in advance of a credit event occurring, this new model also applies to all receivables, including trade receivables, lease receivables, related party loan receivables in non-financial sector entities. The new impairment model is intended to result in earlier recognition of credit losses. The previous model described in International Accounting Standard 39 Financial instruments (IAS 39 was based on incurred losses. One of the major questions now is what models to use to predict expected credit losses in non-financial sector entities. The purpose of this paper is to research the application of the current impairment model, the extent to which the current impairment model can be modified to satisfy new impairment model requirements and the applicability of the binomial model for measuring expected credit losses from accounts receivable.

  2. A perceptual survey of the S and P Purchased Power Credit Risk Policy

    International Nuclear Information System (INIS)

    Rittenhouse, L.J.

    1992-01-01

    In November 1991, Standard and Poor's commissioned UtiliVentures Inc. to conduct a survey among experts in the purchased power industry in order to determine their views on its recently released Purchased power Credit Risk Policy and their general views on purchased power. Respondents for the survey were drawn from attendees to the S and P - sponsored seminars on Emerging Issues for Independent Power held in October 1991 in New York, Los Angeles and San Francisco. The seminars examined the rationale behind the new Purchased Power Credit Policy and how the policy is to be implemented. While the survey is not a scientifically drawn sample, it includes respondents from all key industry groups and is, the author believes, representative of the attendees. The survey findings make generalizations about industry practices which are based on the perceptions of these individuals. It thus identifies perceptual realities: what people believe about the issues underlying the buy vs. build debate, not what others in the industry are saying they should believe. This distinction is vital, because it is the beliefs of these individuals that will shape the evolving purchased power industry. The survey was designed to accomplish three principal goals: (1) To develop systematically a base of information about what people think of the risks and opportunities in the purchased power industry and to determine the extent to which the S and P purchased Power Credit Policy incorporates these views. (2) To identify whether and to what extent respondents value the S and P Policy and how they think it might affect the industry. (3) To use the survey findings to adjust and fine tune the S and P Policy and to develop new ways and improve existing ways to educate and inform the industry about what the Policy intends to accomplish

  3. THE POLITICS OF THE NATIONAL BANK OF ROMANIA TO DEAL WITH CREDITING RISK

    Directory of Open Access Journals (Sweden)

    Vechiu Camelia

    2011-12-01

    Full Text Available The market economy refers to the implicit presence of a banking system which could ensure the mobilization of all the monetary resources of the respective economy and their temporary orientation towards the development of efficient economic activities. A significant aspect of the bank performance refers to the measurement of risks with the aim to diminish them. If the bank management is poor and the risks are not taken into consideration, it will be possible that the earning capacity to be reduced and to lead even to the bankruptcy. Due to the fact that the banks are lending, they assume risks which are determined by the doubtful debtor (it appears the insolvency, or by the general economic evolution (which involves interest and exchange rate risks, or by the financial structure of the bank (financing long-term credits from short or sight deposits. The bank risk can be determined by external or internal factors of the bank due to the competitive environment. In the professional literature, the methodology used for the risk management involves several steps: the risk identification and analysis; the risk elimination and control; the risk assessment and assuming; the risk financing by debiting the general or specific reserves or by transfer which means the insurance of the bank company. For those banks operating in Romania, the risks are even more evident due to the hostile environment in which they operate, but also due to the specificity of the Romanian banking system which is still evolving and adapting to the competitive stringencies of the market economy. This paper is trying to follow the risk involvement towards the bank activity taking into account its importance and role in order to ensure the increase of the bank earning capacity.

  4. Profitability Identification of National Banking Through Credit, Capital, Capital Structure, Efficiency, and Risk Level

    Directory of Open Access Journals (Sweden)

    Sugeng Haryanto

    2016-04-01

    Full Text Available This study aims to analyze the influence of credit, bank capital, capital structure, efficiency and risk toward the profitability in banking industry. Bank has an important role in the economy in Indonesia in 2014. The purposive sampling technique was used in this study to filter the samples according to several criteria such as being public at least in 2008, and publicly released the financial statement from 2008-2013. The total sample of 25 banks. Multiple regression technique was used in this study to analyze the data. The results show that credit, bank capital, and capital structure positively influence the profitability. This result supported by the previous research. The other finding shows that efficiency and risk have significantly negative effect on profitability. Bangking has an 80 percent market share in the financing of intermediation function of the entire financial system.Penelitian bertujuan menganalisis pengaruh antara kredit, permodalan bank, struktur modal, efisiensi dan risiko terhadap profitabilitas pada industri perbankan. Bank mempunyai peran penting dalam ekonomi Indonesia 2014. Teknik sampling penelitian ini adalah purposive sampling, dengan kriteria bank bank telah go public sebelum tahun 2008, mempublikasikan laporan keuangan tahun 2008-2013. Jumlah sampel sebanyak 25 bank. Teknik analisis yang digunakan regresi linier berganda. Hasil penelitian menunjukkan bahwa kredit, permodalan bank dan struktur modal berpengaruh terhadap profitabilitas dengan arah positif. Hasil lainnya adalah variabel efisiensi dan risiko berpengaruh signifikan dengan arah negatif terhadap profitabilitas. Perbankan memiliki market share 80 persen dalam sistem keuangan.JEL Classification: G3, G32

  5. Ordering policies of a deteriorating item in an EOQ model with backorder under two-level partial trade credit

    Science.gov (United States)

    Molamohamadi, Zohreh; Arshizadeh, Rahman; Ismail, Napsiah

    2015-05-01

    In the classical inventory model, it was assumed that the retailer must settle the accounts of the purchased items as soon as they are received. In practice, however, the supplier usually offers a full or partial delay period to the retailer to pay for the amount of the purchasing costs. In the partial trade credit contract, which is mostly applied to avoid non-payment risks, the retailer must pay for a portion of the purchased goods at the time of ordering and may delay settling the rest until the end of the predefined agreed upon period, so-called credit period. This paper assumes a two-level partial trade credit where both supplier and retailer offer a partial trade credit to their downstream members. The objective here is to determine the retailer's ordering policy of a deteriorating item by formulating his economic order quantity (EOQ) inventory system with backorder as a cost minimization problem. The sensitivity of the variables on different parameters has been also analyzed by applying numerical examples.

  6. The Multi-state Latent Factor Intensity Model for Credit Rating Transitions

    NARCIS (Netherlands)

    Koopman, S.J.; Lucas, A.; Monteiro, A.

    2008-01-01

    A new empirical reduced-form model for credit rating transitions is introduced. It is a parametric intensity-based duration model with multiple states and driven by exogenous covariates and latent dynamic factors. The model has a generalized semi-Markov structure designed to accommodate many of the

  7. Banks’ internal controls and risk management: Value-added functions in Italian credit cooperative banks

    Directory of Open Access Journals (Sweden)

    Rosaria Cerrone

    2013-12-01

    Full Text Available A critical component of safe and sound bank management is constituted by an effective and efficient system of internal controls, which help to ensure that the goals and objectives of a bank will be met, that long-term profitability targets will be achieved, and maintain reliable financial and managerial reporting. Such a system can also ensure that the bank will comply with laws and regulations as well as policies, plans, internal rules and procedures, and decrease the risk of unexpected losses or damage to the bank’s reputation. The paper describes the essential elements of a sound internal control system and through a qualitative approach, it shows how is tied to the rules attaining capital requirements and, above all, to the purpose of the Internal Capital Adequacy Assessment Process (ICAAP which aims at determining the adequate capitalisation of a bank given the risks endured as well as future risks arising from growth, and new business lines. After the recent financial crisis ICAAP is becoming more and more relevant and a central component of an effective strategy for managing risk and creating value. All principles and considerations are referred to Italian Credit Cooperative Banks particular both for dimension and for governance and risk management. They have been contacted though local federations and the results confirm the existing of weakness in internal controls.

  8. Hazardous Times for Monetary Policy : What do Twenty-three Million Bank Loans Say about the Effects of Monetary Policy on Credit Risk?

    NARCIS (Netherlands)

    Jiminez, G.; Ongena, S.; Saurina, J.

    2007-01-01

    We investigate the impact of the stance and path of monetary policy on the level of credit risk of individual bank loans and on lending standards. We employ the Credit Register of the Bank of Spain that contains detailed monthly information on virtually all loans granted by all credit institutions

  9. Hazardous times for monetary policy : What do twenty-three million bank loans say about the effects of monetary policy on credit risk-taking?

    NARCIS (Netherlands)

    Jiménez, G.; Ongena, S.; Peydro, J.L.; Saurina, J.

    2014-01-01

    We identify the effects of monetary policy on credit risk-taking with an exhaustive credit register of loan applications and contracts. We separate the changes in the composition of the supply of credit from the concurrent changes in the volume of supply and quality, and the volume of demand. We

  10. MODEL PENSKORAN PARTIAL CREDIT PADA BUTIR MULTIPLE TRUE-FALSE BIDANG FISIKA

    Directory of Open Access Journals (Sweden)

    Wasis Wasis

    2013-01-01

    Full Text Available Tujuan penelitian ini menghasilkan model penskoran politomus untuk respons butir multiple true-false, sehingga dapat mengestimasi secara lebih akurat kemampuan di bidang fisika. Pengembangan penskoran menggunakan Four-D model dan diuji akurasinya melalui penelitian empiris dan simulasi. Penelitian empiris menggunakan 15 butir multiple true-false yang diambil dari soal UMPTN tahun 1996-2006 dan dikenakan pada 410 mahasiswa baru FMIPA Universitas Negeri Surabaya angkatan tahun 2007. Respons peserta tes diskor dengan tiga model partial credit (PCM I; II; dan III dan secara dikotomus. Hasil penskoran dianalisis dengan program Quest untuk mendapat-kan estimasi tingkat kesukaran butir (δ dan estimasi ke-mampuan peserta (θ untuk menentukan nilai fungsi informasi tes dan kesalahan baku estimasi. Penelitian simulasi mengguna-kan data bangkitan berdasarkan parameter empiris (δ dan θ memakai program statistik SAS dan akurasi estimasinya di-analisis dengan metode root mean squared error (RMSE. Hasil penelitian ini menunjukkan: (i Penskoran PCM dengan pem-bobotan mampu mengestimasi kemampuan lebih akurat di-bandingkan tanpa pembobotan maupun secara dikotomus; (ii Semakin banyak jumlah kategori dalam penskoran partial credit, semakin akurat. Kata kunci: model penskoran partial credit, butir multiple true-false ____________________________________________________________ THE PARTIAL CREDIT SCORING MODEL FOR THE MULTIPLE TRUE-FALSE BUTIRS IN PHYSICS Abstract This study is an attempt to overcome the weaknesses. This study aims to produce a polytomous scoring model for responses to multiple true-false butirs in order to get a more accurate estimation of abilities in physics. It adopts the Four-D model and its accuracy is assessed through empirical and simulation studies. The empirical study employed 15 multiple true-false butirs taken from the New Students Entrance Test of State University the year of 1996–2006. It administered to 410 new students enrolled

  11. 76 FR 41602 - Fair Credit Reporting Risk-Based Pricing Regulations

    Science.gov (United States)

    2011-07-15

    ... on and disclose the key factors provided with the scores purchased from consumer reporting agencies... making the credit decision, the creditor must disclose that score and certain information relating to the... following disclosures: (1) the credit score \\4\\ used by the person in making the credit decision; (2) the...

  12. A relative risk comparison of criticality control strategies based on fresh fuel and burnup credit design bases

    International Nuclear Information System (INIS)

    Sanders, T.L.

    1989-01-01

    The fresh fuel design basis provides some margin of safety, i.e., criticality safety is almost independent of loading operations if fuel designs do not change significantly over the next 40 years. However, the design basis enrichment for future nuclear fuel will most likely vary with time. As a result, it cannot be guaranteed that the perceived passivity of the concept will be maintained over the life cycle of a future cask system. Several options are available to ensure that the reliability of a burnup credit system is comparable to or greater than that of a system based on a fresh fuel assumption. Criticality safety and control reliability could increase with burnup credit implementation. The safety of a burnup credit system could be comparable to that for a system based on the fresh fuel assumption. A burnup credit philosophy could be implemented without any cost-benefit tradeoff. A burnup credit design basis could result in a significant reduction in total system risk as well as economic benefits. These reductions occur primarily as a result of increased cask capacities and, thus, fewer shipments. Fewer shipments also result in fewer operations over the useful life of a cask, and opportunities for error decrease. The system concept can be designed such that only benefits occur. These benefits could include enhanced criticality safety and the overall reliability of cask operations, as well as system risk and economic benefits. Thus, burnup credit should be available as an alternative for the criticality design of spent fuel shipping casks

  13. Development of methodological tools for assessing enterprise credit worthiness taking into account off-balance sheet risks

    Directory of Open Access Journals (Sweden)

    N.G. Vygovska

    2017-12-01

    Full Text Available The article is devoted to the improvement of methodical tools for assessing the credit worthiness of enterprises’ legal entities taking into account the impact of off-balance-sheet risks on the definite integral class of a debtor-borrower. The authors substantiate that the non-accounting of off-balance sheet commitments in assessing the borrower’s credit worthiness leads to false managerial decisions on granting a loan and increasing the level of credit risk of the bank. The purpose of the article is to study the questions of methodical tools for assessing the credit worthiness of economic entities and develop directions for improving its analytical support taking into account the impact of off-balance-sheet risks. The object of the research is the analytical support for assessing the credit worthiness of a borrower-legal entity taking into account off-balance-sheet risks. The authors put forward and proved the hypothesis that, acting as the guarantor or principal of another enterprise, the assessment of the borrower's credit worthiness undergoes significant changes. The coefficient analysis of the methodological provision for assessing the borrower's credit rating by the current method number 351 is carried out, as a result of which the influence on the integral index and the debtor class is proved. When determining the reliability class of the borrower, the most affected are solvency ratios (especially for short-term loans and financial sustainability (for long-term loans to the borrower. The current methodology for defining these indicators does not take into account the effect of off-balance sheet risks, which is due to the use of financial reporting data, which does not include data on off-balance sheet instruments. The methodological support of credit-worthiness analysis is proposed, taking into account the impact of off-balance sheet risks on it. The prospects for further research should be formulated in the direction of improving the

  14. An isotonic partial credit model for ordering subjects on the basis of their sum scores

    NARCIS (Netherlands)

    Ligtvoet, R.

    2012-01-01

    In practice, the sum of the item scores is often used as a basis for comparing subjects. For items that have more than two ordered score categories, only the partial credit model (PCM) and special cases of this model imply that the subjects are stochastically ordered on the common latent variable.

  15. A Comparison of Item Exposure Control Procedures with the Generalized Partial Credit Model

    Science.gov (United States)

    Sanchez, Edgar Isaac

    2008-01-01

    To enhance test security of high stakes tests, it is vital to understand the way various exposure control strategies function under various IRT models. To that end the present dissertation focused on the performance of several exposure control strategies under the generalized partial credit model with an item pool of 100 and 200 items. These…

  16. Methods for Assessing Item, Step, and Threshold Invariance in Polytomous Items Following the Partial Credit Model

    Science.gov (United States)

    Penfield, Randall D.; Myers, Nicholas D.; Wolfe, Edward W.

    2008-01-01

    Measurement invariance in the partial credit model (PCM) can be conceptualized in several different but compatible ways. In this article the authors distinguish between three forms of measurement invariance in the PCM: step invariance, item invariance, and threshold invariance. Approaches for modeling these three forms of invariance are proposed,…

  17. An Isotonic Partial Credit Model for Ordering Subjects on the Basis of Their Sum Scores

    Science.gov (United States)

    Ligtvoet, Rudy

    2012-01-01

    In practice, the sum of the item scores is often used as a basis for comparing subjects. For items that have more than two ordered score categories, only the partial credit model (PCM) and special cases of this model imply that the subjects are stochastically ordered on the common latent variable. However, the PCM is very restrictive with respect…

  18. 17 CFR 240.15c3-1e - Deductions for market and credit risk for certain brokers or dealers (Appendix E to 17 CFR 240...

    Science.gov (United States)

    2010-04-01

    ... credit risk for certain brokers or dealers (Appendix E to 17 CFR 240.15c3-1). 240.15c3-1e Section 240....15c3-1(c)(2)(vi) and (c)(2)(vii) and to compute deductions for credit risk pursuant to this Appendix E... the broker or dealer will use to calculate deductions for market and credit risk on those categories...

  19. Credit Spreads Across the Business Cycle

    DEFF Research Database (Denmark)

    Nielsen, Mads Stenbo

    This paper studies how corporate bond spreads vary with the business cycle. I show that both level and slope of empirical credit spread curves are correlated with the state of the economy, and I link this to variation in idiosyncratic jump risk. I develop a structural credit risk model...... that accounts for both business cycle and jump risk, and show by estimation that the model captures the counter-cyclical level and pro-cyclical slope of empirical credit spread curves. In addition, I provide a new procedure for estimation of idiosyncratic jump risk, which is consistent with observed shocks...

  20. The Effect of Credit Risk and Capital Adequacy on the Profitability of Rural Banks in the Philippines

    Directory of Open Access Journals (Sweden)

    Mendoza Rufo

    2017-03-01

    Full Text Available This paper examines the credit risk and capital adequacy of the 567 rural banks in the Philippines to investigate how both variables affect bank profitability. Using the Arellano-Bond estimator, we found out that credit risk has a negative and statistically significant relationship with profitability. However, empirical analysis showed that capital adequacy has no significant impact on the profitability of rural banks in the Philippines. It is therefore necessary for the rural banks to examine more deeply if capital infusion would result in higher profitability than increasing debts. The study also implies that it is imperative for the banks to understand which risk factors have greater impact on their financial performance and use better risk-adjusted performance measurement to support their strategies. Rural banks should establish credit risk management that defines the process from initiation to approval of loans, taking into consideration the sound credit risk management practices issued by regulatory bodies. Moreover, rural banks need to enhance internal control measures to ensure the strict implementation of internal processes on lending operations.

  1. A hybrid model using decision tree and neural network for credit scoring problem

    Directory of Open Access Journals (Sweden)

    Amir Arzy Soltan

    2012-08-01

    Full Text Available Nowadays credit scoring is an important issue for financial and monetary organizations that has substantial impact on reduction of customer attraction risks. Identification of high risk customer can reduce finished cost. An accurate classification of customer and low type 1 and type 2 errors have been investigated in many studies. The primary objective of this paper is to develop a new method, which chooses the best neural network architecture based on one column hidden layer MLP, multiple columns hidden layers MLP, RBFN and decision trees and ensembling them with voting methods. The proposed method of this paper is run on an Australian credit data and a private bank in Iran called Export Development Bank of Iran and the results are used for making solution in low customer attraction risks.

  2. Development Of The Technique Of Assessment Of Banking Risks Of Long-Term Crediting Of Investments (On The Example Of Banks Of Sevastopol

    Directory of Open Access Journals (Sweden)

    Ulyana Viktorovna Dremova

    2015-03-01

    Full Text Available The external destabilizing factor — financial crisis — has significantly influenced on the level increase of riskiness of the banking credit operations. Taking into account that the increased level of risk follows long-term credits, these operations has been influenced the most, that can be as one of the constraining conditions for the provision of bank long-term credit resources. It, in turn, causes the need to develop the risk assessment technique of long-term credits in regulation of banks’ long-term credit operations. As the risk assessment of credit operations in banking practice is generally limited to the calculation of credit risk, it is efficient to consider the scientifically reasonable approach to a risks assessment of long-term crediting including influence of private risks for the purpose of carrying out the generalized assessment of riskiness both separate types of long-term credits, and a long-term credit portfolio in general. The offered method is based on the calculation of aggregate risk coefficient of the long-term credits, calculated by means of mathematical method of principal component. In the work, it is offered to perform an assessment of private risks by means of statistics: the expectation value, mean square deviation, and the coefficient of a variation. The use of the principal components’ method at the risk assessment of longterm crediting meets such requirements as a lack of value judgment, accounting of specific features of private risks of long-term credits, mathematical validity. It gives the chance to apply the offered risk assessment method of long-term credits in banking. The conclusion is made that the application of an aggregative risk indicator of a long-term crediting will allow banks to trace more accurately the level of riskiness of a long-term credit portfolio and separate types of long-term credits that will strengthen the bank information and analytical base on risk regulation in the field and

  3. Derivative pricing with liquidity risk : Theory and evidence from the credit default swap market

    NARCIS (Netherlands)

    Bongaerts, D.; de Jong, F.C.J.M.; Driessen, J.J.A.G.

    2011-01-01

    We derive an equilibrium asset pricing model incorporating liquidity risk, derivatives, and short-selling due to hedging of nontraded risk. We show that illiquid assets can have lower expected returns if the short-sellers have more wealth, lower risk aversion, or shorter horizon. The pricing of

  4. Demand, credit and macroeconomic dynamics: A microsimulation model

    NARCIS (Netherlands)

    Meijers, H.H.M.; Nomaler, Z.O.; Verspagen, B.

    2014-01-01

    We develop a microsimulation model for the macroeconomic business cycle. Our model is based on three main ideas: (i) we want to specify how macroeconomic coordination is achieved without a dominating influence of price mechanisms, (ii) we want to incorporate the stock-flow-consistent approach that

  5. Credit derivatives in emerging markets

    OpenAIRE

    Romain Rancière

    2002-01-01

    Credit Derivatives are securities that offer protection against credit or default risk of bonds or loans. The credit derivatives emerging market has grown rapidly and credit derivatives are widely used. This paper describes the emerging credit derivatives market structure. The current market activity is analyzed through elementary pricing dynamics and the study of the term structure of default risk. Focusing on the performance of credit derivatives in stress situation, including legal and mar...

  6. OPTIMAL STOCK MODELING FOR NON-FOODS RETAILER SELLING ON-CREDIT

    Directory of Open Access Journals (Sweden)

    Vladimir V. Manakhov

    2016-01-01

    Full Text Available The article is dedicated to the problem of retail stock optimization within mo-nopolistic competition market while selling non-food goods to customers on-credit. Optimization model has been developed and appropriate technique of stock volume planning has been introduced

  7. On reserve money for an EOQ model in an inflationary environment under supplier credits

    NARCIS (Netherlands)

    Singh, S.R.; Jain, R.

    2009-01-01

    We propose to derive a deterministic inventory model for a stock with time-varying deterioration rate with a linear trend in demand over a finite planning horizon in this study. We assume that the supplier offers a credit limit to the retailer during which there is no interest charged. However, the

  8. Parent Ratings of ADHD Symptoms: Generalized Partial Credit Model Analysis of Differential Item Functioning across Gender

    Science.gov (United States)

    Gomez, Rapson

    2012-01-01

    Objective: Generalized partial credit model, which is based on item response theory (IRT), was used to test differential item functioning (DIF) for the "Diagnostic and Statistical Manual of Mental Disorders" (4th ed.), inattention (IA), and hyperactivity/impulsivity (HI) symptoms across boys and girls. Method: To accomplish this, parents completed…

  9. Applying a Weighted Maximum Likelihood Latent Trait Estimator to the Generalized Partial Credit Model

    Science.gov (United States)

    Penfield, Randall D.; Bergeron, Jennifer M.

    2005-01-01

    This article applies a weighted maximum likelihood (WML) latent trait estimator to the generalized partial credit model (GPCM). The relevant equations required to obtain the WML estimator using the Newton-Raphson algorithm are presented, and a simulation study is described that compared the properties of the WML estimator to those of the maximum…

  10. On the Existence and Uniqueness of JML Estimates for the Partial Credit Model

    Science.gov (United States)

    Bertoli-Barsotti, Lucio

    2005-01-01

    A necessary and sufficient condition is given in this paper for the existence and uniqueness of the maximum likelihood (the so-called joint maximum likelihood) estimate of the parameters of the Partial Credit Model. This condition is stated in terms of a structural property of the pattern of the data matrix that can be easily verified on the basis…

  11. Strategies for Controlling Item Exposure in Computerized Adaptive Testing with the Generalized Partial Credit Model

    Science.gov (United States)

    Davis, Laurie Laughlin

    2004-01-01

    Choosing a strategy for controlling item exposure has become an integral part of test development for computerized adaptive testing (CAT). This study investigated the performance of six procedures for controlling item exposure in a series of simulated CATs under the generalized partial credit model. In addition to a no-exposure control baseline…

  12. Exploring Alternative Characteristic Curve Approaches to Linking Parameter Estimates from the Generalized Partial Credit Model.

    Science.gov (United States)

    Roberts, James S.; Bao, Han; Huang, Chun-Wei; Gagne, Phill

    Characteristic curve approaches for linking parameters from the generalized partial credit model were examined for cases in which common (anchor) items are calibrated separately in two groups. Three of these approaches are simple extensions of the test characteristic curve (TCC), item characteristic curve (ICC), and operating characteristic curve…

  13. Assessing Credit with Equity : A CEV Model with Jump to Default

    NARCIS (Netherlands)

    Campi, L.; Polbennikov, S.Y.; Sbuelz, A.

    2005-01-01

    Unlike in structural and reduced-form models, we use equity as a liquid and observable primitive to analytically value corporate bonds and credit default swaps.Restrictive assumptions on the .rm.s capital structure are avoided.Default is parsimoniously represented by equity value hitting the zero

  14. Cooperative credit banks and regional growth: creation of a local development model and analysis of the «G. Toniolo» Cooperative Credit Bank in San Cataldo

    Directory of Open Access Journals (Sweden)

    Massimo Cermelli

    2015-11-01

    Full Text Available The economic crisis has called into question not only the banking systems, but also the development model. Cooperative credit banks have returned to occupy a central role, demonstrating with his broad background that another way of providing financial services can exist. In Italy, cooperative credit banks are principal players in the banking economic system. One of those banks is the «G. Toniolo», which has become over the years a reference in the local banking system.Received: 07.06.2015Accepted: 30.07.2015

  15. The Interaction Between FX and Credit Risk as an Example of Intersection of Monetary and Financial Stability Policy Goals – The Case of Serbia

    Directory of Open Access Journals (Sweden)

    Jović Željko

    2016-05-01

    Full Text Available The financial system of Serbia is highly bank-centric and euroised, which is a common specific feature of financial systems in developing countries. High level of euroisation represents an adequate environment for the development of emphasized interaction of foreign exchange and credit risks; therefore, creation of the spillover mechanism of foreign exchange risk to credit risk is immanent for euroised systems. Although maintaining the stability of the dinar exchange rate is a secondary goal of the National Bank of Serbia in relation to price and financial stability as the primary goals, in terms of existence of the aforesaid spillover mechanism, maintaining stability of the dinar exchange rate represents the area where there is an interaction between the goals of monetary policy (price stability and those of financial stability policy (maintaining and strengthening the financial system’s stability. In order to explore whether the spillover mechanism of foreign exchange risk to credit risk exists in Serbia’s financial system, the vector autoregressive (VAR model is applied on data from the Serbian banking sector to quantify the impact of changes in the dinar exchange rates on the rate of non-performing loans (NPLs; the sample was formed in the period of increased instability of the dinar exchange rate, from 31 January 2008 to 31 December 2010. As we have quantitatively confirmed the impact of increase in the dinar exchange rate on the increase of 90-120 days past due NPLs, we can conclude that the existence of expressed interaction between foreign exchange risk and credit risk in the Serbian financial system represents a paradigm of the regulator’s need to achieve contemporary goals of monetary and financial stability policy by maintaining relative stability of the dinar exchange rates. Depreciation of the local currency has inflationary pressure on price stability and simultaneously influences the achievement of financial stability goals

  16. Credit scoring analysis using kernel discriminant

    Science.gov (United States)

    Widiharih, T.; Mukid, M. A.; Mustafid

    2018-05-01

    Credit scoring model is an important tool for reducing the risk of wrong decisions when granting credit facilities to applicants. This paper investigate the performance of kernel discriminant model in assessing customer credit risk. Kernel discriminant analysis is a non- parametric method which means that it does not require any assumptions about the probability distribution of the input. The main ingredient is a kernel that allows an efficient computation of Fisher discriminant. We use several kernel such as normal, epanechnikov, biweight, and triweight. The models accuracy was compared each other using data from a financial institution in Indonesia. The results show that kernel discriminant can be an alternative method that can be used to determine who is eligible for a credit loan. In the data we use, it shows that a normal kernel is relevant to be selected for credit scoring using kernel discriminant model. Sensitivity and specificity reach to 0.5556 and 0.5488 respectively.

  17. Effect of Macroeconomic Factors on Credit Risk of Banks in Developed and Developing Countries: Dynamic Panel Method

    OpenAIRE

    Ghyasi, Azar

    2016-01-01

    Globalization phenomenon provided a suitable environment with new opportunities for investment in various countries. In this way, the issue of credit risk of countries and rankings of international ranking institutions has become more important. Owing to the fact that using values and numbers and quantization of the measured variables in evaluation of the risk of countries is considered as an appropriate tool for analysis of the economic status of each country. In this paper, it is tried to e...

  18. Strategic Importance of Credit Risk Management to Shareholders’ Wealth-Sustanance in Nigerian Banks: an Empirical Analysis

    Directory of Open Access Journals (Sweden)

    Adebisi Sunday Abayomi

    2012-02-01

    Full Text Available This study highlighted the roles and strategic importance of credit risk management in thebanking industry vis-à-vis sustenance of shareholders’ wealth. The authors examined whether areduction in the non-performing credits in banks’ loan portfolio will reveal a possible correlationbetween effective credit risk management administration and shareholder’s wealth. In testing this,secondary data were sourced from the randomly selected five banks financials (between the period of2006 to 2010 with the use of relevant ratios. Twohypotheses were tested using multiple regressionand correlation method. The result of hypothesis one showed that the calculated r – statistics (r =.429,p<0.05 was greater than the tabulated r – statistics (r =.381 showing that the test was significantat0.05 alpha level. The result of hypothesis two alsoshowed that the calculated r-statistics (r=.403,p<0.05 was greater than tabulated r-statistics (r=.381 at 0.05 level of significance which impliedthat, there was a significant relationship betweencredit risk management and shareholders’ wealth.Based on these results, the authors recommended that, the banking sector should strive to employobjective standards of professionalism, experienceand high integrity in placement of managers whoare responsible for managing the credit portfolios;for this will largely influence the quality of riskassets management and debt recovery which will in-turn engender confidence in the banking industryand ensure the sustenance of shareholders’ wealth and investment.

  19. Econometric analyses of microfinance credit group formation, contractual risks and welfare impacts in Northern Ethiopia

    NARCIS (Netherlands)

    Berhane Tesfay, G.

    2009-01-01

    Key words
    Microfinance, joint liability, contractual risk, group formation, risk-matching, impact evaluation, Panel data econometrics, dynamic panel probit, trend models, fixed-effects, composite counterfactuals, propensity score matching, farm households, Ethiopia.

    Lack of

  20. Improving default risk prediction using Bayesian model uncertainty techniques.

    Science.gov (United States)

    Kazemi, Reza; Mosleh, Ali

    2012-11-01

    Credit risk is the potential exposure of a creditor to an obligor's failure or refusal to repay the debt in principal or interest. The potential of exposure is measured in terms of probability of default. Many models have been developed to estimate credit risk, with rating agencies dating back to the 19th century. They provide their assessment of probability of default and transition probabilities of various firms in their annual reports. Regulatory capital requirements for credit risk outlined by the Basel Committee on Banking Supervision have made it essential for banks and financial institutions to develop sophisticated models in an attempt to measure credit risk with higher accuracy. The Bayesian framework proposed in this article uses the techniques developed in physical sciences and engineering for dealing with model uncertainty and expert accuracy to obtain improved estimates of credit risk and associated uncertainties. The approach uses estimates from one or more rating agencies and incorporates their historical accuracy (past performance data) in estimating future default risk and transition probabilities. Several examples demonstrate that the proposed methodology can assess default probability with accuracy exceeding the estimations of all the individual models. Moreover, the methodology accounts for potentially significant departures from "nominal predictions" due to "upsetting events" such as the 2008 global banking crisis. © 2012 Society for Risk Analysis.

  1. Boundedly rational credit cycles

    OpenAIRE

    Sáez, María

    1996-01-01

    We propose an evolutionary model of a credit market. We show that the economy exhibits credit cycles. The model predicts dynamics which are consistent with some evidence about the Great Depression. Real shocks trigger episodes of credit--crunch which are observed in the process of adjustment towards the post shock equilibrium.

  2. FraudMiner: A Novel Credit Card Fraud Detection Model Based on Frequent Itemset Mining

    Directory of Open Access Journals (Sweden)

    K. R. Seeja

    2014-01-01

    Full Text Available This paper proposes an intelligent credit card fraud detection model for detecting fraud from highly imbalanced and anonymous credit card transaction datasets. The class imbalance problem is handled by finding legal as well as fraud transaction patterns for each customer by using frequent itemset mining. A matching algorithm is also proposed to find to which pattern (legal or fraud the incoming transaction of a particular customer is closer and a decision is made accordingly. In order to handle the anonymous nature of the data, no preference is given to any of the attributes and each attribute is considered equally for finding the patterns. The performance evaluation of the proposed model is done on UCSD Data Mining Contest 2009 Dataset (anonymous and imbalanced and it is found that the proposed model has very high fraud detection rate, balanced classification rate, Matthews correlation coefficient, and very less false alarm rate than other state-of-the-art classifiers.

  3. FraudMiner: a novel credit card fraud detection model based on frequent itemset mining.

    Science.gov (United States)

    Seeja, K R; Zareapoor, Masoumeh

    2014-01-01

    This paper proposes an intelligent credit card fraud detection model for detecting fraud from highly imbalanced and anonymous credit card transaction datasets. The class imbalance problem is handled by finding legal as well as fraud transaction patterns for each customer by using frequent itemset mining. A matching algorithm is also proposed to find to which pattern (legal or fraud) the incoming transaction of a particular customer is closer and a decision is made accordingly. In order to handle the anonymous nature of the data, no preference is given to any of the attributes and each attribute is considered equally for finding the patterns. The performance evaluation of the proposed model is done on UCSD Data Mining Contest 2009 Dataset (anonymous and imbalanced) and it is found that the proposed model has very high fraud detection rate, balanced classification rate, Matthews correlation coefficient, and very less false alarm rate than other state-of-the-art classifiers.

  4. For which option is credit risk more representative on China banks' total factor productivity Efficiency change or technological progress?

    Institute of Scientific and Technical Information of China (English)

    Fadzlan Sufian

    2012-01-01

    Purpose-The purpose of this paper is to provide new empirical evidence on the impact of credit risk on China banks' total factor productivity.Design/methodology/approach-The paper employs the Malmquist Productivity Index (MP1) which allows for the examination of five different indices:total factor productivity change (TFPCH);technological change (TECHCH);efficiency change (EFFCH);pure technical efficiency change (PEFFCH);and scale efficiency change (SECH) indices.Findings-The empirical findings indicate that the State Owned Commercial Banks (SOCB),Joint Stock Commercial Banks (JSCB),and City Commercial Banks (CCB) have exhibited lower TFPCH levels with the inclusion of risk factor.It was found that the JSCB and CCB have exhibited lower TFPCH due to TECHCH,while the SOCB have exhibited lower TFPCH due to EFFCH.The empirical findings suggest that the inclusion of credit risk factor has resulted in a higher JSCB EFFCH levels.On the other hand,the SOCB and CCB have exhibited a lower EFFCH levels due to SECH and PEFFCH,respectively.Research limitations/implications-The results clearly highlight the importance of credit risk and lending quality in determining the total factor productivity change of banks operating in the China banking sector.The author demonstrates that the inclusion of credit risk factor has resulted in a lower TFPCH level of all banks operating in the China banking sector.Thus,excluding the credit risk factor from the analysis on the China banking sector may potentially bias the result upwards.Practical impIications-In an environment of heavy government influence over the lending process,a large proportion of loans extended by Chinese banks over the years have gone bad.Policymakers should prevent the flow of new non-performing loans by separating bad clients from banks that are being restructured and recapitalized in the reform of the banking sector.Originality/value-By employing the Malmquist Productivity Index (MPI),the present paper contributes to

  5. On a Corporate Bond Pricing Model with Credit Rating Migration Risksand Stochastic Interest Rate

    Directory of Open Access Journals (Sweden)

    Jin Liang

    2017-10-01

    Full Text Available In this paper we study a corporate bond-pricing model with credit rating migration and astochastic interest rate. The volatility of bond price in the model strongly depends on potential creditrating migration and stochastic change of the interest rate. This new model improves the previousexisting models in which the interest rate is considered to be a constant. The existence, uniquenessand regularity of the solution for the model are established. Moreover, some properties includingthe smoothness of the free boundary are obtained. Furthermore, some numerical computations arepresented to illustrate the theoretical results.

  6. A Bayesian Analysis of a Random Effects Small Business Loan Credit Scoring Model

    Directory of Open Access Journals (Sweden)

    Patrick J. Farrell

    2011-09-01

    Full Text Available One of the most important aspects of credit scoring is constructing a model that has low misclassification rates and is also flexible enough to allow for random variation. It is also well known that, when there are a large number of highly correlated variables as is typical in studies involving questionnaire data, a method must be found to reduce the number of variables to those that have high predictive power. Here we propose a Bayesian multivariate logistic regression model with both fixed and random effects for small business loan credit scoring and a variable reduction method using Bayes factors. The method is illustrated on an interesting data set based on questionnaires sent to loan officers in Canadian banks and venture capital companies

  7. Empty creditors and strong shareholders: The real effects of credit risk trading. Second draft

    OpenAIRE

    Colonnello, Stefano; Efing, Matthias; Zucchi, Francesca

    2016-01-01

    Credit derivatives give creditors the possibility to transfer debt cash flow rights to other market participants while retaining control rights. We use the market for credit default swaps (CDSs) as a laboratory to show that the real effects of such debt unbundling crucially hinge on shareholder bargaining power. We find that creditors buy more CDS protection when facing strong shareholders to secure themselves a valuable outside option in distressed renegotiations. After the start of CDS trad...

  8. The Dif Identification in Constructed Response Items Using Partial Credit Model

    OpenAIRE

    Heri Retnawati

    2017-01-01

    The study was to identify the load, the type and the significance of differential item functioning (DIF) in constructed response item using the partial credit model (PCM). The data in the study were the students’ instruments and the students’ responses toward the PISA-like test items that had been completed by 386 ninth grade students and 460 tenth grade students who had been about 15 years old in the Province of Yogyakarta Special Region in Indonesia. The analysis toward the item characteris...

  9. Housing and Macroeconomy: The Role of Credit Channel, Risk -, Demand - and Monetary Shocks

    OpenAIRE

    Dorofeenko, Victor; Lee, Gabriel; Salyer, Kevin; Strobel, Johannes

    2016-01-01

    This paper demonstrates that risk (uncertainty) along with the monetary (interest rates) shocks to the housing production sector are a quantitatively important impulse mechanism for the business and housing cycles. Our model framework is that of the housing supply/banking sector model as developed in Dorofeenko, Lee, and Salyer (2014) with the model of housing demand presented in Iacoviello and Neri (2010). We examine how the factors of production uncertainty,financial intermediation, and ...

  10. On Modeling Risk Shocks

    OpenAIRE

    Dorofeenko, Victor; Lee, Gabriel; Salyer, Kevin; Strobel, Johannes

    2016-01-01

    Within the context of a financial accelerator model, we model time-varying uncertainty (i.e. risk shocks) through the use of a mixture Normal model with time variation in the weights applied to the underlying distributions characterizing entrepreneur productivity. Specifically, we model capital producers (i.e. the entrepreneurs) as either low-risk (relatively small second moment for productivity) and high-risk (relatively large second moment for productivity) and the fraction of both types is...

  11. Trial of a "credit card" asthma self-management plan in a high-risk group of patients with asthma.

    Science.gov (United States)

    D'Souza, W; Burgess, C; Ayson, M; Crane, J; Pearce, N; Beasley, R

    1996-05-01

    The "credit card" asthma self-management plan provides the adult asthmatic patient with simple guidelines for the self-management of asthma, which are based on the self-assessment of peak expiratory flow rate recordings and symptoms. The study was a trial of the clinical efficacy of the credit card plan in a high-risk group of asthmatic patients. In this "before-and-after" trial, patients discharged from the emergency department of Wellington Hospital, after treatment for severe asthma were invited to attend a series of hospital outpatient clinics at which the credit card plan was introduced. Questionnaires were used to compare markers of asthma morbidity, requirement for emergency medical care, and medication use during the 6-month period before and after intervention with the credit card plan. Of the 30 patients with asthma who attended the first outpatient clinic, 26 (17 women and 9 men) completed the program. In these 26 participants, there was a reduction in both morbidity and requirement for acute medical services: specifically, the proportion waking with asthma more than once a week decreased from 65% to 23% (p = 0.005) and the proportion visiting the emergency department for treatment of severe asthma decreased from 58% to 15% (p = 0.004). The patients attending the clinics commented favorably on the plan, in particular on its usefulness as an educational tool for monitoring and treating their asthma. Although the interpretation of this study is limited by the lack of a randomized control group, the findings are consistent with other evidence that the credit card asthma self-management plan can be an effective and acceptable system for improving asthma care in a high-risk group of adult patients with asthma.

  12. Mechanism Analysis of Credit Risk Conduction of Goverment Departments under Public-PrivatePartnership%公私合作下政府部门信用风险传导机理分析

    Institute of Scientific and Technical Information of China (English)

    任志涛; 雷瑞波

    2017-01-01

    以风险共担、利益共享的理念剖析公私合作的内生机理,从系统视域构建公私合作下的政府部门信用风险的传导模型,揭示公私合作下政府部门信用风险的传导机理.研究表明公私合作模式所具有的信用风险内部化特征,促使政府部门信用风险沿着微分动力系统的演变轨迹进行传导,系统均衡状态的均衡点就是信用风险在政府和社会资本之间最优的配置点.在上述基础上,设计公私合作模式下政府部门信用风险管控机制.%This paper analyzes the endogenous mechanism of public-private partnerships based on the concept of risk sharing and benefit sharing. Then,constructs the conduction model of credit risk of government departments under public-private partnership from the point of view of system,andreveals the conduction mechanism of credit risk of government departments under public-private partnership. Research shows that the characteristics of internal credit risk model of public-private partnership promote the government credit risk to conduct along the evolution track of a differential dynamic system,the equilibrium point of system equilibrium state is the optimal allocation point of credit risk between government and social capital. On this basis,designs the credit risk control mechanism of government departments under public-private partnership.

  13. Credit Risk and Financial Performance Assessment of Illinois Farmers: A Comparison of Approaches with Farm Accounting Data

    OpenAIRE

    Zhang, Tianwei; Ellinger, Paul N.

    2006-01-01

    Pro forma financial performance evaluation of agricultural producers is an important issue for lenders, internal management and policy makers. Lenders strive to improve their credit risk management. Internal management is interested in understanding the financial impacts of alternative strategic decisions. And policy makers often assess the magnitude and distributional effects of alternative policies on the future financial performance of farm business. Data limitations are a major impediment...

  14. OPTIMUM VOLUME OF BANK RESERVE: FORECASTING OF OVERDUE CREDIT INDEBTEDNESS USING COPULA MODELS

    Directory of Open Access Journals (Sweden)

    Kazakova K. A.

    2015-12-01

    Full Text Available The article propose to consider the possibility of RLUF-copulas application for the creation of joint distributions of overdue credit indebtedness ranks with macroeconomic indicators for the purpose of indebtedness forecasting and also for the definition of optimum volumes of reserve requirements for the corresponding losses. In this research the comparative analysis of multivariate distributions of RLUF-copula estimation with such classical copulas, as FGM-copula, Frank's copula and Gauss's copula is made. In the article the method of maximum likelihood is used for receiving estimates of model parameters. In case of RLUF-copula Bayesian estimates of parameters are received using the Metropolis algorithm with random volatility. Forecasting of bank reserve volumes for all received models is executed in the form of random sample generation by the means of the algorithm of acceptance-deviation for the creation of the corresponding sample of joint distribution using the copula density function. As the result of playing of hundred possible scenarios of indebtedness volumes is obtained the 95 % confidence level for the possible volume of credit indebtedness which can fully act as the optimum volume of reserve requirements for the corresponding credit losses.

  15. Measuring the coupled risks: A copula-based CVaR model

    Science.gov (United States)

    He, Xubiao; Gong, Pu

    2009-01-01

    Integrated risk management for financial institutions requires an approach for aggregating risk types (such as market and credit) whose distributional shapes vary considerably. The financial institutions often ignore risks' coupling influence so as to underestimate the financial risks. We constructed a copula-based Conditional Value-at-Risk (CVaR) model for market and credit risks. This technique allows us to incorporate realistic marginal distributions that capture essential empirical features of these risks, such as skewness and fat-tails while allowing for a rich dependence structure. Finally, the numerical simulation method is used to implement the model. Our results indicate that the coupled risks for the listed company's stock maybe are undervalued if credit risk is ignored, especially for the listed company with bad credit quality.

  16. Critical analysis of realibility of the model of investment credit approval in agriculture and food processing industry

    Directory of Open Access Journals (Sweden)

    Barjaktarović Lidija

    2016-01-01

    Full Text Available Investments are funds which are invested in certain manufacturing goods, revenue on investments, the process of investment, subject in which it is invested, and which is obtained as a result of the assessment of investment. Every rational investor entering into an investment expects some benefits. Entry decision into a particular investment project carries a business risk, both for investors and for the bank as co-financier of the project. Accordingly, the subject of this paper-research is a critical analysis of the reliability of the model of investment credit approval in agriculture and food processing industry (MICA used by local banks when considering whether to financially support investment needs of large corporate customers in the segment of secondary agriculture production and food processing industry. Applying the model of the correlation analysis, the degree of interconnectedness of indicators of the quality of assets and business performances of Serbian banking sector are quantified.

  17. O modelo kmv e sua utilidade no processo de análise do risco de crédito El modelo kmv y su utilidad en el proceso de análisis de riesgo de crédito Kmv model use for credit risk analysis

    Directory of Open Access Journals (Sweden)

    José Odálio dos Santos

    2009-06-01

    interpretación de los resultados del Modelo KMV, a partir de la estimativa de la probabilidad de insolvencia y de la cartografía entre el punto de default y cuanto distante la empresa se presenta de este referencial.This article analyzed the theoretical foundations of a method for calculation of credit risk, the KMV Model. Evaluation of credit risk is used to measure probability of default when a company no longer has the ability or willingness to meet a contractual commitment. This Model highlights the contribution of information on asset prices available in the market, to measure this probability. The company is evaluated as an option represented by the assets at market value, which may be delivered to creditors whenever market value of the debt exceeds the expectations of cash generation. The concept, calculation and relation with an efficient market were presented. KMV model results were interpreted based upon an estimate of the probability of insolvency and the relation between the point of default and the company position in relation to that reference.

  18. Efficient PDE based numerical estimation of credit and liquidity risk measures for realistic derivative portfolios

    NARCIS (Netherlands)

    de Graaf, C.S.L.

    2016-01-01

    In the Basel III accords in 2013, it was stated that financial institutions should charge Credit Value Adjustment (CVA) to their counterparties for (previously under-regulated) Over-The-Counter (OTC) trades. This CVA can be used to hedge a possible default of the counterparty. One important

  19. Rasch-Master's Partial Credit Model in the assessment of children's creativity in drawings.

    Science.gov (United States)

    Nakano, Tatiana de Cássia; Primi, Ricardo

    2014-01-01

    The purpose of the present study was to use the Partial Credit Model to study the factors of the Test of Creativity in Children and identify which characteristics of the creative person would be more effective to differentiate subjects according to their ability level. A sample of 1426 students from first to eighth grades answered the instrument. The Partial Credits model was used to estimate the ability of the subjects and item difficulties on a common scale for each of the four factors, indicating which items required a higher level of creativity to be scored and will differentiate the more creative individuals. The results demonstrated that the greater part of the characteristics showed good fit indices, with values between 0.80 and 1.30 both infit and outfit, indicating a response pattern consistent with the model. The characteristics of Unusual Perspective, Expression of Emotion and Originality have been identified as better predictors of creative performance because requires greater ability level (usually above two standard deviation). These results may be used in the future development of an instrument's reduced form or simplification of the current correction model.

  20. Credit-proofing fundamentals for a solid credit policy

    Energy Technology Data Exchange (ETDEWEB)

    Lydiatt, I. [KeySpan Energy Canada, Calgary, AB (Canada)

    2003-07-01

    This Power Point presentation presented the basics of a credit policy with reference to corporate objectives, governance, credit definitions, subjective/objective elements, quantification of full risk, management, monitoring, reporting and gate-keeping processes. Options for a credit policy were described as being approval authority grids, confidentiality issues, credit scoring, corporate risk levels, follow-up collection calling, and procedures on unapproved exposures. Recommendations for setting risk and credit limits were also presented with a note emphasizing that in the past 6 months credit evaluation processes have had to deal with the media risk, a new risk that has not been seen before. This risk can be addressed by careful monitoring of stock prices. The paper also presented recommendations for what to look for as indicators and how to deal with risk in volatile price periods. Credit tools for volatile times were described. 1 tab.

  1. Credit-proofing fundamentals for a solid credit policy

    International Nuclear Information System (INIS)

    Lydiatt, I.

    2003-01-01

    This Power Point presentation presented the basics of a credit policy with reference to corporate objectives, governance, credit definitions, subjective/objective elements, quantification of full risk, management, monitoring, reporting and gate-keeping processes. Options for a credit policy were described as being approval authority grids, confidentiality issues, credit scoring, corporate risk levels, follow-up collection calling, and procedures on unapproved exposures. Recommendations for setting risk and credit limits were also presented with a note emphasizing that in the past 6 months credit evaluation processes have had to deal with the media risk, a new risk that has not been seen before. This risk can be addressed by careful monitoring of stock prices. The paper also presented recommendations for what to look for as indicators and how to deal with risk in volatile price periods. Credit tools for volatile times were described. 1 tab

  2. Effectiveness of bank credit activity evaluation with application of economic and mathematic modeling

    Science.gov (United States)

    Galeeva, G. M.; Zagladina, E. N.; Kadeeva, E. N.

    2018-05-01

    The paper presents data on the influence of the most significant factors having impact on the credit portfolio volume, as well as conducts correlation and regression analysis with the subsequent construction of the trend for a short period. Credit activity is understood as the bank activity in the formation of a credit portfolio. Considering the structure of the bank credit portfolio, it can be observed that it consists of credits granted by the bank particularly for legal entities, individuals and other banks. Herewith, it is necessary to understand that any decrease in the credit portfolio will adversely affect the financial stability and effectiveness of any commercial bank. Moreover, during crisis periods, the policy and practice of banks have been determined as quite aggressive and conducted as such with regard to interest rates. The dynamics of credit portfolio volume has been selected as an independent factor due to the reason that it can fully explain the current development situation and the effectiveness of the bank credit policy. Considering the dependent factors, their influence will be assessed by the credit portfolio volume indicator. The authors have distinguished the following ones among them: the volume of credits granted to individuals; the volume of credits granted to legal entities; the amount of overdue credits in the credit portfolio; bank investments in the securities; inflation; key rate.

  3. Supply chain model with price- and trade credit-sensitive demand under two-level permissible delay in payments

    Science.gov (United States)

    Giri, B. C.; Maiti, T.

    2013-05-01

    This article develops a single-manufacturer and single-retailer supply chain model under two-level permissible delay in payments when the manufacturer follows a lot-for-lot policy in response to the retailer's demand. The manufacturer offers a trade credit period to the retailer with the contract that the retailer must share a fraction of the profit earned during the trade credit period. On the other hand, the retailer provides his customer a partial trade credit which is less than that of the manufacturer. The demand at the retailer is assumed to be dependent on the selling price and the trade credit period offered to the customers. The average net profit of the supply chain is derived and an algorithm for finding the optimal solution is developed. Numerical examples are given to demonstrate the coordination policy of the supply chain and examine the sensitivity of key model-parameters.

  4. Three stage trade credit policy in a three-layer supply chain-a production-inventory model

    Science.gov (United States)

    Pal, Brojeswar; Sankar Sana, Shib; Chaudhuri, Kripasindhu

    2014-09-01

    The main purpose of this paper is to investigate the optimal replenishment lot size of supplier and optimal production rate of manufacturer under three levels of trade credit policy for supplier-manufacturer-retailer supply chain. The supplier provides a fixed credit period to settle the accounts to the manufacturer, while the manufacturer gives a fixed credit period to settle the account to the retailer and the retailer, in turn, also offers a credit period to each of its customers to settle the accounts. We assume that the supplier supplies the raw material to the manufacturer and sends back the defective raw materials to the outside supplier after completion of inspection at one lot with a sales price. The system always produces good items in the model. Also, we consider the idle times of supplier and manufacturer. Finally, numerical examples are provided to illustrate the behaviour and application of the model with graphical simulation.

  5. Rating agencies: role and influence of their sovereign credit risk assessment in the Euro area

    OpenAIRE

    Sibert, Anne

    2012-01-01

    Credit ratings have a huge impact on the access to and costs of funding, regardless whether the rated entity is a private enterprise or a sovereign borrower. Since the beginning of the financial crisis there has been a vivid and controversial debate about methods, timing and procedures used by these agencies. In this compilation of five notes provided by members of the Monetary Expert Panel the role of the rating agencies and their influence on the euro area is discussed in more detail.

  6. Network Effects in Risk Sharing and Credit Market Access: Evidence from Istanbul

    OpenAIRE

    Fikret Adaman; Oya Pinar Ardic; Didem Tuzemen

    2006-01-01

    It is a truism that households in developing countries that face idiosyncratic income/expenditure shocks may face difficulties in smoothing consumption through formal credit institutions, and hence rely, at least partially, on informal ties. While this issue has been explored extensively in the literature for rural areas, the picture reflecting the urban setting remains relatively uninvestigated. This paper aims to fill this gap by presenting an exclusively designed survey implemented i...

  7. Empty creditors and strong shareholders: The real effects of credit risk trading

    OpenAIRE

    Colonnello, Stefano; Efing, Matthias; Zucchi, Francesca

    2017-01-01

    Credit derivatives allow creditors to transfer debt cash flow rights to other market participants while retaining control rights. Theory predicts that this transfer can create empty creditors that do not fully internalize liquidation costs and liquidate borrowers excessively often. This empty creditor problem is concentrated in firms whose creditors would face powerful shareholders in distressed debt renegotiations. Consistent with this prediction, we show that (1) creditors buy more CDS prot...

  8. An EPQ Inventory Model with Allowable Shortages for Deteriorating Items under Trade Credit Policy

    Directory of Open Access Journals (Sweden)

    Zohreh Molamohamadi

    2014-01-01

    Full Text Available This paper attempts to obtain the replenishment policy of a manufacturer under EPQ inventory model with backorder. It is assumed here that the manufacturer delays paying for the received goods from the supplier and the items start deteriorating as soon as they are being produced. Based on these assumptions, the manufacturer’s inventory model is formulated, and cuckoo search algorithm is applied then to find the replenishment time, order quantity, and selling price with the objective of maximizing the manufacturer’s total net profit. Besides, the traditional inventory system is shown as a special case of the proposed model in this paper, and numerical examples are given to demonstrate better performance of trade credit. These examples are also used to compare the results of cuckoo search algorithm with genetic algorithm and investigate the effects of the model parameters on its variables and net profit.

  9. CREDIT SCORING MODELS IN ESTIMATING THE CREDITWORTHINESS OF SMALL AND MEDIUM AND BIG ENTERPRISES

    Directory of Open Access Journals (Sweden)

    Robert Zenzerović

    2011-02-01

    Full Text Available This paper is focused on estimating the credit scoring models for companies operating in the Republic of Croatia. According to level of economic and legal development, especially in the area of bankruptcy regulation as well as business ethics in the Republic of Croatia, the models derived can be applied in wider region particularly in South-eastern European countries that twenty years ago transferred from state directed to free market economy. The purpose of this paper is to emphasize the relevance and possibilities of particular financial ratios in estimating the creditworthiness of business entities what was realized by performing the research among 110 companies. Along most commonly used research methods of description, analysis and synthesis, induction, deduction and surveys, the mathematical and statistical logistic regression method took the central part in this research. The designed sample of 110 business entities represented the structure of firms operating in Republic of Croatia according to their activities as well as to their size. The sample was divided in two sub samples where the first one consist of small and medium enterprises (SME and the second one consist of big business entities. In the next phase the logistic regression method was applied on the 50 independent variables – financial ratios calculated for each sample unit in order to find ones that best discriminate financially stable from unstable companies. As the result of logistic regression analysis, two credit scoring models were derived. First model include the liquidity, solvency and profitability ratios and is applicable for SME’s. With its classification accuracy of 97% the model has high predictive ability and can be used as an effective decision support tool. Second model is applicable for big companies and include only two independent variables – liquidity and solvency ratios. The classification accuracy of this model is 92,5% and, according to criteria of

  10. Melanoma Risk Prediction Models

    Science.gov (United States)

    Developing statistical models that estimate the probability of developing melanoma cancer over a defined period of time will help clinicians identify individuals at higher risk of specific cancers, allowing for earlier or more frequent screening and counseling of behavioral changes to decrease risk.

  11. CRank: A Credit Assessment Model in C2C e-Commerce

    Science.gov (United States)

    Zhang, Zhiqiang; Xie, Xiaoqin; Pan, Haiwei; Han, Qilong

    An increasing number of consumers not only purchase but also resell merchandise through C2C web sites. One of the greatest concerns for the netizens is the lacking of a fair credit assessment system. Trust and trustworthiness are crucial to the survival of online markets. Reputation systems that rely on feedback from traders help to sustain the trust. And reputation systems provide one of the ways of building trusts online. In this chapter, we investigate a credit assessment model, CRank, for the members in the context of e-market systems, such as Alibaba, eBay, to solve such problem as how to choose a credible business partner when the customer wants to purchase some products from the Internet. CRank makes use of feedback profile made up of ranks from other users as well as an overall feedback rating for the user based on the idea of PageRank. This model can be used to build a trustable relation network among business participants.

  12. Model rules and regulations for a global CO2 emissions credit market

    International Nuclear Information System (INIS)

    Sandor, R.L.; Cole, J.B.; Kelly, M.E.

    1994-01-01

    On 21 April 1993, on the occasion of Earth Day, the United States affirmed its commitment to reducing emissions of greenhouse gases to their 1990 levels by the year 2000. In doing so, the United States joined the European Union (EU), Japan, and approximately 141 other countries that had either committed themselves to this international objective or subscribed to the general principles contained in the United Nations Framework Convention on Climate Change, signed at UNCED, Rio de Janeiro, June 1992. The commitment of these three trading groups provides the basis for recommending that a market for tradeable carbon dioxide (CO 2 ) emission entitlements among these groups be implemented as soon as an initial set of rules and regulations can be drafted. The goal of a tradeable CO 2 entitlement or credit market is to lower the cost of limiting emissions. The Costs of CO 2 emission abatement are lowered because the market encourages more emission reductions to be produced by the most efficient resources. The ability easily to selI CO 2 credits created through large emission cuts allows cost recovery by, and incentives for, the most efficient sources of emission reductions. The purpose of this paper is to stimulate debate by providing model rules and regulations for a tradeable CO 2 emission credit market. The trading rules and regulations proposed here are meant to initiate a process whereby participants will iterate toward a final set of rules and regulations. Therefore, our proposal should create a point of departure for further adjustments and transformation to the initial set of recommendations. A specific proposal will be advanced at this point in order to provide a basis for the conceptualization of this global market. Moreover, this specific proposal will help focus dialogue and may provide insight into the general recommendations presented in the balance of this paper

  13. Application of a rule extraction algorithm family based on the Re-RX algorithm to financial credit risk assessment from a Pareto optimal perspective

    Directory of Open Access Journals (Sweden)

    Yoichi Hayashi

    2016-01-01

    Full Text Available Historically, the assessment of credit risk has proved to be both highly important and extremely difficult. Currently, financial institutions rely on the use of computer-generated credit scores for risk assessment. However, automated risk evaluations are currently imperfect, and the loss of vast amounts of capital could be prevented by improving the performance of computerized credit assessments. A number of approaches have been developed for the computation of credit scores over the last several decades, but these methods have been considered too complex without good interpretability and have therefore not been widely adopted. Therefore, in this study, we provide the first comprehensive comparison of results regarding the assessment of credit risk obtained using 10 runs of 10-fold cross validation of the Re-RX algorithm family, including the Re-RX algorithm, the Re-RX algorithm with both discrete and continuous attributes (Continuous Re-RX, the Re-RX algorithm with J48graft, the Re-RX algorithm with a trained neural network (Sampling Re-RX, NeuroLinear, NeuroLinear+GRG, and three unique rule extraction techniques involving support vector machines and Minerva from four real-life, two-class mixed credit-risk datasets. We also discuss the roles of various newly-extended types of the Re-RX algorithm and high performance classifiers from a Pareto optimal perspective. Our findings suggest that Continuous Re-RX, Re-RX with J48graft, and Sampling Re-RX comprise a powerful management tool that allows the creation of advanced, accurate, concise and interpretable decision support systems for credit risk evaluation. In addition, from a Pareto optimal perspective, the Re-RX algorithm family has superior features in relation to the comprehensibility of extracted rules and the potential for credit scoring with Big Data.

  14. Avaliação da aplicabilidade de um modelo de credit scoring com varíaveis sistêmicas e não-sistêmicas em carteiras de crédito bancário rotativo de pessoas físicas An evaluation on the applicability of a credit scoring model, with systemic and non-systemic variables in revolving bank credit portfolio for individuals

    Directory of Open Access Journals (Sweden)

    José Odálio dos Santos

    2007-08-01

    capability. Likewise, a more significant historical exposition of the banks to insolvency risk is being observed, such as the risk of not getting paid (partially or totally and the revolving credit borrowed by consumers. Considering the size and the importance of this market to the great commercial banks and to the economy as a whole, the scope of this research comprises the following points: 1. detailing the processes of subjective and objective credit analysis carried out by the main domestic private banks; 2. approaching the selective function of interest rates in revolving credits; 3. highlighting the main characteristics of credit scoring models; and 4. proposing a model of credit scoring for revolving credits. This model is based on systemic and non-systemic variables and directed to the reduction of insolvency risk. The applicability of the credit scoring model proposed in a sample, extracted from the consumers credit portfolio which belongs to an important medium size Brazilian private commercial bank (Bank X - fictitious name, presented a satisfactory accuracy level in the identification of prospective (96% and non-prospective (92% clients, which led to the conclusion that it included and considered adequately the representative variables of borrowers’ payment capability.

  15. Probabilistic assessment of dry transport with burnup credit

    International Nuclear Information System (INIS)

    Lake, W.H.

    2003-01-01

    The general concept of probabilistic analysis and its application to the use of burnup credit in spent fuel transport is explored. Discussion of the probabilistic analysis method is presented. The concepts of risk and its perception are introduced, and models are suggested for performing probability and risk estimates. The general probabilistic models are used for evaluating the application of burnup credit for dry spent nuclear fuel transport. Two basic cases are considered. The first addresses the question of the relative likelihood of exceeding an established criticality safety limit with and without burnup credit. The second examines the effect of using burnup credit on the overall risk for dry spent fuel transport. Using reasoned arguments and related failure probability and consequence data analysis is performed to estimate the risks of using burnup credit for dry transport of spent nuclear fuel. (author)

  16. THE RISK OF FRAUD WITHOUT IMPLEMENTATION OF THE PILLARS OF CORPORATE GOVERNANCE AT THE LEVEL OF CREDIT INSTITUTIONS IN ROMANIA

    Directory of Open Access Journals (Sweden)

    VLAD MARIANA

    2013-02-01

    Full Text Available In this article, the authors seek to emphasize the risk factors that may occur due to not implementing or faultyimplementation of corporate governance for credit institutions, and its role in fraud prevention and detection. To avoidinappropriate governance, top management should have special preoccupations for the development of strategies,developing internal control policies by which to determine and evaluate the risks of the organization. Corporategovernance starts with a broad range of beneficiaries (stakeholders who contribute with resources to an organization(investments, taxes, charitable contributions, etc. Those members are the direct and indirect beneficiaries of theorganizational unit to be regulated. Corporate governance involving several parties: the leadership board, the internalauditors or those of the external environment. In some cases, regulatory authorities or professional associations,contribute to this process.

  17. A Two-Layer Least Squares Support Vector Machine Approach to Credit Risk Assessment

    Science.gov (United States)

    Liu, Jingli; Li, Jianping; Xu, Weixuan; Shi, Yong

    Least squares support vector machine (LS-SVM) is a revised version of support vector machine (SVM) and has been proved to be a useful tool for pattern recognition. LS-SVM had excellent generalization performance and low computational cost. In this paper, we propose a new method called two-layer least squares support vector machine which combines kernel principle component analysis (KPCA) and linear programming form of least square support vector machine. With this method sparseness and robustness is obtained while solving large dimensional and large scale database. A U.S. commercial credit card database is used to test the efficiency of our method and the result proved to be a satisfactory one.

  18. A risk evaluation model and its application in online retailing trustfulness

    Science.gov (United States)

    Ye, Ruyi; Xu, Yingcheng

    2017-08-01

    Building a general model for risks evaluation in advance could improve the convenience, normality and comparability of the results of repeating risks evaluation in the case that the repeating risks evaluating are in the same area and for a similar purpose. One of the most convenient and common risks evaluation models is an index system including of several index, according weights and crediting method. One method to build a risk evaluation index system that guarantees the proportional relationship between the resulting credit and the expected risk loss is proposed and an application example is provided in online retailing in this article.

  19. Methodology of Credit Analysis Development

    Directory of Open Access Journals (Sweden)

    Slađana Neogradi

    2017-12-01

    Full Text Available The subject of research presented in this paper refers to the definition of methodology for the development of credit analysis in companies and its application in lending operations in the Republic of Serbia. With the developing credit market, there is a growing need for a well-developed risk and loss prevention system. In the introduction the process of bank analysis of the loan applicant is presented in order to minimize and manage the credit risk. By examining the subject matter, the process of processing the credit application is described, the procedure of analyzing the financial statements in order to get an insight into the borrower's creditworthiness. In the second part of the paper, the theoretical and methodological framework is presented applied in the concrete company. In the third part, models are presented which banks should use to protect against exposure to risks, i.e. their goal is to reduce losses on loan operations in our country, as well as to adjust to market conditions in an optimal way.

  20. The Role of Credit in Predicting US Recessions

    DEFF Research Database (Denmark)

    Pönkä, Harri

    are useful predictors of US recessions over and above the control variables both in and out of sample. Especially the excess bond premium, capturing the cyclical changes in the relationship between default risk and credit spreads, is found to be a powerful predictor. Overall, models that combine credit......We study the role of credit in forecasting US recession periods with probit models. We employ both classical recession predictors and common factors based on a large panel of financial and macroeconomic variables as control variables. Our findings suggest that a number of credit variables...

  1. A Multidimensional Partial Credit Model with Associated Item and Test Statistics: An Application to Mixed-Format Tests

    Science.gov (United States)

    Yao, Lihua; Schwarz, Richard D.

    2006-01-01

    Multidimensional item response theory (IRT) models have been proposed for better understanding the dimensional structure of data or to define diagnostic profiles of student learning. A compensatory multidimensional two-parameter partial credit model (M-2PPC) for constructed-response items is presented that is a generalization of those proposed to…

  2. A Study of Reverse-Worded Matched Item Pairs Using the Generalized Partial Credit and Nominal Response Models

    Science.gov (United States)

    Matlock Cole, Ki Lynn; Turner, Ronna C.; Gitchel, W. Dent

    2018-01-01

    The generalized partial credit model (GPCM) is often used for polytomous data; however, the nominal response model (NRM) allows for the investigation of how adjacent categories may discriminate differently when items are positively or negatively worded. Ten items from three different self-reported scales were used (anxiety, depression, and…

  3. Breast cancer risks and risk prediction models.

    Science.gov (United States)

    Engel, Christoph; Fischer, Christine

    2015-02-01

    BRCA1/2 mutation carriers have a considerably increased risk to develop breast and ovarian cancer. The personalized clinical management of carriers and other at-risk individuals depends on precise knowledge of the cancer risks. In this report, we give an overview of the present literature on empirical cancer risks, and we describe risk prediction models that are currently used for individual risk assessment in clinical practice. Cancer risks show large variability between studies. Breast cancer risks are at 40-87% for BRCA1 mutation carriers and 18-88% for BRCA2 mutation carriers. For ovarian cancer, the risk estimates are in the range of 22-65% for BRCA1 and 10-35% for BRCA2. The contralateral breast cancer risk is high (10-year risk after first cancer 27% for BRCA1 and 19% for BRCA2). Risk prediction models have been proposed to provide more individualized risk prediction, using additional knowledge on family history, mode of inheritance of major genes, and other genetic and non-genetic risk factors. User-friendly software tools have been developed that serve as basis for decision-making in family counseling units. In conclusion, further assessment of cancer risks and model validation is needed, ideally based on prospective cohort studies. To obtain such data, clinical management of carriers and other at-risk individuals should always be accompanied by standardized scientific documentation.

  4. Introduction of Credit Derivatives and Valuation of Credit Default Swap

    OpenAIRE

    Han, Lu

    2006-01-01

    The credit derivative market was established at the beginning of the 1990s since the emergence of credit derivatives fits the rapid development of the whole derivatives market. However, compare to other derivative market, this market is still small and incomplete. As with other derivatives, credit derivatives can be used to either take more risk or hedge it, hence various credit derivatives instruments are accepted and widely used by market participants such as banks, insurance companies, etc...

  5. 76 FR 79531 - Corporate Credit Unions

    Science.gov (United States)

    2011-12-22

    ... exclude CLF stock subscriptions, based on the asset's negligible credit risk and to facilitate corporate... removing paragraphs (c)(3) and (f)(4) and adding paragraph (h) to read as follows: Sec. 704.6 Credit risk... NATIONAL CREDIT UNION ADMINISTRATION 12 CFR Part 704 RIN 3133-AD95 Corporate Credit Unions AGENCY...

  6. At-Risk High School Students Recovering Course Credits Online: What We Know and Need to Know

    Science.gov (United States)

    Viano, Samantha L.

    2018-01-01

    The majority of American high school students enrolling in online education are doing so in credit recovery courses. These are online courses specifically for students who previously failed a face-to-face version of the course. Despite the popularity of credit recovery courses, the literature on online learning largely ignores credit recovery…

  7. Pre-counseling education for low literacy women at risk of Hereditary Breast and Ovarian Cancer (HBOC): patient experiences using the Cancer Risk Education Intervention Tool (CREdIT).

    Science.gov (United States)

    Joseph, Galen; Beattie, Mary S; Lee, Robin; Braithwaite, Dejana; Wilcox, Carolina; Metrikin, Maya; Lamvik, Kate; Luce, Judith

    2010-10-01

    The Cancer Risk Education Intervention Tool (CREdIT) is a computer-based (non-interactive) slide presentation designed to educate low-literacy, and ethnically and racially diverse public hospital patients at risk of Hereditary Breast and Ovarian Cancer (HBOC) about genetics. To qualitatively evaluate participants' experience with and perceptions of a genetic education program as an adjunct to genetic counseling, we conducted direct observations of the intervention, semi-structured in person interviews with 11 women who viewed CREdIT, and post-counseling questionnaires with the two participating genetic counselors. Five themes emerged from the analysis of interviews: (1) genetic counseling and testing for breast/ovarian cancer was a new concept; (2) CREdIT's story format was particularly appealing; (3) changes in participants' perceived risk for breast cancer varied; (4) some misunderstandings about individual risk and heredity persisted after CREdIT and counseling; (5) the context for viewing CREdIT shaped responses to the presentation. Observations demonstrated ways to make the information provided in CREdIT and by genetic counselors more consistent. In a post-session counselor questionnaire, counselors' rating of the patient's preparedness before the session was significantly higher for patients who viewed CREdIT prior to their appointments than for other patients. This novel educational tool fills a gap in HBOC education by tailoring information to women of lower literacy and diverse ethnic/racial backgrounds. The tool was well received by interview participants and counselors alike. Further study is needed to examine the varied effects of CREdIT on risk perception. In addition, the implementation of CREdIT in diverse clinical settings and the cultural adaptation of CREdIT to specific populations reflect important areas for future work.

  8. Optimizing Support Vector Machine Parameters with Genetic Algorithm for Credit Risk Assessment

    Science.gov (United States)

    Manurung, Jonson; Mawengkang, Herman; Zamzami, Elviawaty

    2017-12-01

    Support vector machine (SVM) is a popular classification method known to have strong generalization capabilities. SVM can solve the problem of classification and linear regression or nonlinear kernel which can be a learning algorithm for the ability of classification and regression. However, SVM also has a weakness that is difficult to determine the optimal parameter value. SVM calculates the best linear separator on the input feature space according to the training data. To classify data which are non-linearly separable, SVM uses kernel tricks to transform the data into a linearly separable data on a higher dimension feature space. The kernel trick using various kinds of kernel functions, such as : linear kernel, polynomial, radial base function (RBF) and sigmoid. Each function has parameters which affect the accuracy of SVM classification. To solve the problem genetic algorithms are proposed to be applied as the optimal parameter value search algorithm thus increasing the best classification accuracy on SVM. Data taken from UCI repository of machine learning database: Australian Credit Approval. The results show that the combination of SVM and genetic algorithms is effective in improving classification accuracy. Genetic algorithms has been shown to be effective in systematically finding optimal kernel parameters for SVM, instead of randomly selected kernel parameters. The best accuracy for data has been upgraded from kernel Linear: 85.12%, polynomial: 81.76%, RBF: 77.22% Sigmoid: 78.70%. However, for bigger data sizes, this method is not practical because it takes a lot of time.

  9. An Inverse Problem Study: Credit Risk Ratings as a Determinant of Corporate Governance and Capital Structure in Emerging Markets: Evidence from Chinese Listed Companies

    Directory of Open Access Journals (Sweden)

    ManYing Kang

    2017-11-01

    Full Text Available Credit risk rating is shown to be a relevant determinant in order to estimate good corporate governance and to self-optimize capital structure. The conclusion is argued from a study on a selected (and justified sample of (182 companies listed on the Shanghai Stock Exchange (SHSE and the Shenzhen Stock Exchange (SZSE and which use the same Shanghai Brilliance Credit Rating & Investors Service Company (SBCR assessment criteria, for their credit ratings, from 2010 to 2015. Practically, 3 debt ratios are examined in terms of 11 characteristic variables. Moreover, any relationship between credit rating and corporate governance can be thought to be an interesting finding. The relationship we find between credit rating and leverage is not as evident as that found by other researchers for different countries; it is significantly positively related to the outside director, firm size, tangible assets and firm age, and CEO and chairman office plurality. However, leverage is found to be negatively correlated with board size, profitability, growth opportunity, and non-debt tax shield. Credit rating is positively associated with leverage, but in a less significant way. CEO-Board chairship duality is insignificantly related to leverage. The non-debt tax shield is significantly correlated with leverage. The correlation coefficient between CEO duality and auditor is positive but weakly significant, but seems not consistent with expectations. Finally, profitability cause could be regarded as an interesting finding. Indeed, there is an inverse correlation between profitability and total debt (Notice that the result supports the pecking order theory. In conclusion, it appears that credit rating has less effect on the so listed large Chinese companies than in other countries. Nevertheless, the perspective of assessing credit risk rating by relevant agencies is indubitably a recommended time dependent leverage determinant.

  10. Modeling Banking, Sovereign, and Macro Risk in a CCA Global VAR

    OpenAIRE

    Dale F. Gray

    2013-01-01

    The purpose of this paper is to develop a model framework for the analysis of interactions between banking sector risk, sovereign risk, corporate sector risk, real economic activity, and credit growth for 15 European countries and the United States. It is an integrated macroeconomic systemic risk model framework that draws on the advantages of forward-looking contingent claims analysis (CCA) risk indicators for the banking systems in each country, forward-looking CCA risk indicators for sover...

  11. The At-Risk Student's Journey with Online Course Credit: Looking at Perceptions of Care

    Science.gov (United States)

    Barnett, Karis K.

    2016-01-01

    Studies addressing at-risk students' perceptions of valuable caring relationships within their unique online environment are rare. While the phrase at-risk has a variety of meanings, this study examined the term pertaining to students who were labeled due to endangerment of not graduating from high school based on their life circumstances. Through…

  12. Estimation of Corporate Credit Rating Quality in Emerging Markets

    African Journals Online (AJOL)

    information that is not already readily available to investors. In order to ... is institutionalisation: that is, the increased use of credit ratings in financial ..... three financial ratios are included in the model to account for within-firm default risks.

  13. An EPQ Model with Increasing Demand and Demand Dependent Production Rate under Trade Credit Financing

    Directory of Open Access Journals (Sweden)

    Juanjuan QIN

    2015-05-01

    Full Text Available This paper investigates an EPQ model with the increasing demand and demand dependent production rate involving the trade credit financing policy, which is seldom reported in the literatures. The model considers the manufacturer was offered by the supplier a delayed payment time. It is assumed that the demand is a linear increasing function of the time and the production rate is proportional to the demand. That is, the production rate is also a linear function of time. This study attempts to offer a best policy for the replenishment cycle and the order quantity for the manufacturer to maximum its profit per cycle. First, the inventory model is developed under the above situation. Second, some useful theoretical results have been derived to characterize the optimal solutions for the inventory system. The Algorithm is proposed to obtain the optimal solutions of the manufacturer. Finally, the numerical examples are carried out to illustrate the theorems, and the sensitivity analysis of the optimal solutions with respect to the parameters of the inventory system is performed. Some important management insights are obtained based on the analysis.

  14. Measurement of Online Student Engagement: Utilization of Continuous Online Student Behavior Indicators as Items in a Partial Credit Rasch Model

    Science.gov (United States)

    Anderson, Elizabeth

    2017-01-01

    Student engagement has been shown to be essential to the development of research-based best practices for K-12 education. It has been defined and measured in numerous ways. The purpose of this research study was to develop a measure of online student engagement for grades 3 through 8 using a partial credit Rasch model and validate the measure…

  15. An Examination of Exposure Control and Content Balancing Restrictions on Item Selection in CATs Using the Partial Credit Model.

    Science.gov (United States)

    Davis, Laurie Laughlin; Pastor, Dena A.; Dodd, Barbara G.; Chiang, Claire; Fitzpatrick, Steven J.

    2003-01-01

    Examined the effectiveness of the Sympson-Hetter technique and rotated content balancing relative to no exposure control and no content rotation conditions in a computerized adaptive testing system based on the partial credit model. Simulation results show the Sympson-Hetter technique can be used with minimal impact on measurement precision,…

  16. Comparison of Exposure Controls, Item Pool Characteristics, and Population Distributions for CAT Using the Partial Credit Model

    Science.gov (United States)

    Lee, HwaYoung; Dodd, Barbara G.

    2012-01-01

    This study investigated item exposure control procedures under various combinations of item pool characteristics and ability distributions in computerized adaptive testing based on the partial credit model. Three variables were manipulated: item pool characteristics (120 items for each of easy, medium, and hard item pools), two ability…

  17. A Comparison of Item Selection Techniques and Exposure Control Mechanisms in CATs Using the Generalized Partial Credit Model.

    Science.gov (United States)

    Pastor, Dena A.; Dodd, Barbara G.; Chang, Hua-Hua

    2002-01-01

    Studied the impact of using five different exposure control algorithms in two sizes of item pool calibrated using the generalized partial credit model. Simulation results show that the a-stratified design, in comparison to a no-exposure control condition, could be used to reduce item exposure and overlap and increase pool use, while degrading…

  18. Corporate ownership as a means to solve adverse selection problems in a model of asymmetric information and credit rationing

    NARCIS (Netherlands)

    Gangopadhyay, Shubashis; Lensink, Robert

    2001-01-01

    This paper analyzes an asymmetric information model where the financing needs of entrepreneurs are obtained from two sources. We show that adverse selection is only important if the credit constraint of banks is not too tight. Next, we show that banks can induce a pattern of corporate ownership,

  19. Dynamic Diversification in Corporate Credit

    DEFF Research Database (Denmark)

    Christoffersen, Peter; Jacobs, Kris; Jin, Xisong

    We characterize diversification in corporate credit using a new class of dynamic copula models which can capture dynamic dependence and asymmetry in large samples of firms. We also document important differences between credit spread and equity return dependence dynamics. Modeling a decade...... the crisis and remain high as well. The most important shocks to credit dependence occur in August of 2007 and in August of 2011, but interestingly these dates are not associated with significant changes to median credit spreads....

  20. Trust and Credit

    DEFF Research Database (Denmark)

    Harste, Gorm

    The present paper is an answer to the question, how did trust and credit emerge. The systems of trust and credit reduce the environmental and contextual complexities in which trust and credit are embedded. The paper analyses the forms of this reduction in a number of stages in the evolution...... of history from the present risk of modern systems back to early modernity, the Reformation and the high medieval Revolutions in law, organization and theology. It is not a history of economics, but a history of the conditions of some communication codes used in economic systems....

  1. 75 FR 64785 - Corporate Credit Unions

    Science.gov (United States)

    2010-10-20

    ... management (ALM) and credit risk, and whether to make modifications in the area of corporate governance. NCUA... the revisions, an analysis of how the final investment, credit risk, and asset liability provisions..., credit risk, ALM, liquidity, and capital measures that together should greatly reduce the systemic risk...

  2. Credit default swap (CDS) ındexes and their usage in risk management by Turkish banks

    OpenAIRE

    Cafrı, Sinan

    2008-01-01

    115 pages Avrupa ve Amerika'da finansal işletmelerin ve bankaların risk yönetiminde Kredi Temerrüt Swap endekslerini her geçen gün artarak kullanmaları, bu endekslerin risk yönetiminde verimli bir araç olduğuna işaret etmektedir. Bu çalışmanın amacı, Kredi Temerrüt Swap endekslerinin risk yönetiminde kullanımını analiz edip bu endekslerin Türkiye'deki kullanım olasılıklarını değerlendirmektir. Dolayısıyla, ilk aşamada Kredi Temerrüt Swaplarının ve Kredi Temerrüt Swap endekslerinin genel bi...

  3. The Dilemmas over Credit Policy Management in a Company

    Directory of Open Access Journals (Sweden)

    Maria Gorczyńska

    2013-11-01

    Full Text Available Purpose of the article: The paper identifies the core dilemmas over the establishment of the credit policy in a company. It considers the general scope and basic stages of credit policy management and analyses each stage of credit policy in terms of decisive aspects. The main areas of concerns are discussed within the settlement of credit policy and its implementation with regard to the model of optimal credit policy. Scientific aim: The paper aims at constructing a unified model of issues rising dilemmas while setting and implementing the credit policy management. It also aims at identifying core decisive problems in each of these fields and at providing a structured questions framework. Methodology/methods: The paper is based on conceptual analysis and deduction of the literature and general review of issues related to credit policy management. It containts autors’ own view on the problems included in each stage of credit policy management. Findings: Credit policy management is a subject for numerous dilemmas. The main areas of concerns are related to: the decision about the goal of credit policy managemet with regard to its restrictiveness, the settlement of credit policy with regard to elements of credit policy, and finally the implementation with regard to the risk of bad debts occurrence. Conclusions: (limits, implications etc The establishment of credit policy in a company requires to balance contrary interests and thus involves wide variety of issues to be considered. The presented model of decisive problems might be applied in each company regardless to their size.

  4. The Dif Identification in Constructed Response Items Using Partial Credit Model

    Directory of Open Access Journals (Sweden)

    Heri Retnawati

    2017-10-01

    Full Text Available The study was to identify the load, the type and the significance of differential item functioning (DIF in constructed response item using the partial credit model (PCM. The data in the study were the students’ instruments and the students’ responses toward the PISA-like test items that had been completed by 386 ninth grade students and 460 tenth grade students who had been about 15 years old in the Province of Yogyakarta Special Region in Indonesia. The analysis toward the item characteristics through the student categorization based on their class was conducted toward the PCM using CONQUEST software. Furthermore, by applying these items characteristics, the researcher draw the category response function (CRF graphic in order to identify whether the type of DIF content had been in uniform or non-uniform. The significance of DIF was identified by comparing the discrepancy between the difficulty level parameter and the error in the CONQUEST output results. The results of the analysis showed that from 18 items that had been analyzed there were 4 items which had not been identified load DIF, there were 5 items that had been identified containing DIF but not statistically significant and there were 9 items that had been identified containing DIF significantly. The causes of items containing DIF were discussed.

  5. A Study of At-Risk Students' Perceptions of an Online Academic Credit Recovery Program in an Urban North Texas Independent School District

    Science.gov (United States)

    Buckley, Mychl K.

    2012-01-01

    The purpose of this research study was to describe and analyze at-risk high school students' perceptions of their experiences with online academic credit recovery classes offered to them through an urban school district's dropout prevention department. The review of literature concerning curricula for online programs revealed that the variety of…

  6. 77 FR 27255 - Self-Regulatory Organizations; ICE Clear Credit LLC; Order Approving Proposed Rule Change To...

    Science.gov (United States)

    2012-05-09

    ... Organizations; ICE Clear Credit LLC; Order Approving Proposed Rule Change To Reduce the Current Level of Risk Mutualization Among Clearing Participants and To Modify the Initial Margin Risk Model So That It Is Easier for... modifications to its risk model for clearing credit default swaps (``CDS'') contracts. For the first...

  7. Financing agribusiness: Insurance coverage as protection against credit risk of warehouse receipt collateral

    Directory of Open Access Journals (Sweden)

    Jovičić Daliborka

    2017-01-01

    Full Text Available Financing agribusiness by warehouse receipts allows the agricultural producers to obtain working capital on the basis of agricultural products stored in licensed warehouses, as collateral. The implementation of the system of licensed warehouses and issuance of warehouse receipts as collateral for obtaining a bank loan is supported by the European Bank for Reconstruction and Development and it has had positive results in the neighbouring countries. The precondition for financing this project was to establish a Compensation Fund for providing insurance coverage for licensed warehouses against professional liability. However, in the lack of an adequate legal framework, the operational risk is possible to occur. Bearing in mind that Serbia has a tradition in insurance industry and a number of operating insurance companies, the issue is that of the economic benefit and the method of insuring against this risk. The paper will present a detailed analysis of the operation of the Fund, capital requirement, solvency margin and a critical review of the Law on Public Warehouses which regulates the rights and obligations of the Compensation Fund in the case of loss occurrence.

  8. 49 CFR 260.13 - Credit reform.

    Science.gov (United States)

    2010-10-01

    ... appropriations, direct payment of a Credit Risk Premium by the Applicant or a non-Federal infrastructure partner... 49 Transportation 4 2010-10-01 2010-10-01 false Credit reform. 260.13 Section 260.13... REHABILITATION AND IMPROVEMENT FINANCING PROGRAM Overview § 260.13 Credit reform. The Federal Credit Reform Act...

  9. 76 FR 54991 - Corporate Credit Unions

    Science.gov (United States)

    2011-09-06

    ... believes the credit risk of carrying this asset is negligible and warrants such treatment, as CLF stock is... credit union excludes the consolidated assets of such programs from risk-weighted assets pursuant to... paragraphs (c)(3) and (f)(4) and adding new p(h) to read as follows: Sec. 704.6 Credit risk management...

  10. Relationship between Credit Recovery Programs and Graduation Rates for At-Risk Students on the Navajo Indian Reservation

    Science.gov (United States)

    Fahey, John M.

    2010-01-01

    Low graduation rates of high school students are a problem for the Native American community. One possible solution for low graduation rates is a credit recovery program that may assist Native American students to recover credit not earned in their early high school years. The purpose of this study was to examine the effectiveness of a credit…

  11. The Struggle to Pass Algebra: Online vs. Face-to-Face Credit Recovery for At-Risk Urban Students

    Science.gov (United States)

    Heppen, Jessica B.; Sorensen, Nicholas; Allensworth, Elaine; Walters, Kirk; Rickles, Jordan; Taylor, Suzanne Stachel; Michelman, Valerie

    2017-01-01

    Students who fail algebra are significantly less likely to graduate on time, and algebra failure rates are consistently high in urban districts. Identifying effective credit recovery strategies is critical for getting students back on track. Online courses are now widely used for credit recovery, yet there is no rigorous evidence about the…

  12. Effect 0f Credit Risk Management Techniques 0n The Performance 0f Unsecured Bank Loans Employed Commercial Banks In Kenya

    Directory of Open Access Journals (Sweden)

    Prof. R.W Gakure

    2013-07-01

    Full Text Available Financial risk in a banking organization is possibility that the outcome of an action or event could bring up adverse impacts. Such outcomes could either result in a direct loss of earnings / capital or may result in imposition of constraints on bank’s ability to meet its business objectives. The purpose of this study was to investigate the effect of credit risk management techniques on the performance of unsecured bank loans by commercial banks in Kenya.

  13. Penskalaan Butir Format Respons Pilihan dan Respons Bebas Berdasarkan Model Rasch dan Partial Credit

    Directory of Open Access Journals (Sweden)

    Eko Hariadi

    2007-06-01

    Full Text Available Penelitian melihat pengaruh jumlah parameter butir, kategori respons bebas (RB, pengaruh sampel terhadap akurasi estimasi parameter kemampuan untuk menghasilkan estimasi yang stabil dan pengaruh pembobotan butir RP dan butir RB terhadap kesalahan baku. Penelitian dalam dua tahap, simulasi menggunakan 30 kondisi dengan replikasi 50 dengan variabel panjang tes, jumlah kategori, dan jumlah parameter butir, dan analisis deskriptif, dilanjutkan penerapan penskalaan gabungan butir tipe respons pilihan (rp dan butir respons bebas (rb pada konstruksi tes elektronika yang terdiri 40 butir pilihan ganda dan 4 butir jawaban tersusun, 3 butir memiliki lima kategori jawaban dan 1 butir dengan 4 kategori jawaban, melibatkan 355 siswa. Hasil penelitian menunjukkan: ukuran sampel kurang berpengaruh pada root mean square error atau (RSME> dan korelasi antara 9 dengan 0, namun berpengaruh terhadap akurasi estimasi parameter butir pilihan ganda (/>/y,dan parameter butir respons tersusun (3^- Jumlah parameter butir berpengaruh terhadap parameter kemampuan, tetapi tidak berpengaruh terhadap akurasi dari b^, dan S„,. Estimasi dari parameter tingkat kesulitan butir jawaban tersusun tiga kategori lebih akurat daripada butir jawaban tersusun lima kategori. Estimasi tahan {robust untuk parameter kesulitan butir jawaban tersusun 5 kategori memerlukan sampel minimal 250 responden, sedangkan untuk butir respons tersusun 3 kategori memerlukan sampel minimal 100 responden. Estimasi parameter kemampuan dari skor total (0^^ tidak sama dengan rata-rata jumlah tbeta dari masing-masing subtes (0^ + 0CR. Theta dari tes yang dikalibrasi bersama-sama berbeda dengan theta dari total subtes yang dikalibrasi secara terpisah. Korelasi kemampuan yang mengunakan pembobotan dan kemampuan tanpa pembobotan mempunyai suatu rentang dari 0,988 sampai 0,948. Kata kunci: penyekaiaan, model rash dan partial credit.

  14. Application of Generalized Hukuhara derivative approach in an economic production quantity model with partial trade credit policy under fuzzy environment

    Directory of Open Access Journals (Sweden)

    Pinki Majumder

    2016-01-01

    Full Text Available In this present study, a production inventory model with partial trade credit is formulated and solved in fuzzy environment via Generalized Hukuhara derivative approach. To capture the market, a supplier offers a trade credit period to its retailers. Due to this facility, retailer also offers a partial trade credit period to his/her customer to boost the demand of the item. In practical life situation, demands are generally dependent upon time. Constant demand of an item varies time to time. In this vague situation, demands are taken as time dependent, where its constant part is taken as Left Right - type fuzzy number. In this paper, Generalized Hukuhara derivative approach is used to solve the fuzzy inventory model. Four different cases are considered by using Generalized Hukuhara-(i differentiability and Generalized Hukuhara-(ii differentiability. The objective of this paper is to find out the optimal time so as the total inventory cost is minimum. Finally the model is solved by generalized reduced gradient method. The proposed model and technique are illustrated by numerical examples. Some sensitivity analyses both in tabular and graphical forms are presented and the effects of minimum cost with respect to various inventory parameters are discussed.

  15. An EOQ Model with Stock-Dependent Demand under Two Levels of Trade Credit and Time Value of Money

    OpenAIRE

    H.A.O. Jia-Qin; M.O. Jiangtao

    2013-01-01

    Since the value of money changes with time, it is necessary to take account of the influence of time factor in making the replenishment policy. In this study, to investigate the influence of the time value of money to the inventory strategy, an inventory system for deteriorating items with stock-dependent demand is investigated under two levels of trade credit. The method to efficiently determine the optimal cycle time is presented. Numerical examples are provided to demonstrate the model and...

  16. Trade credit: Elusive insurance of firm growth

    NARCIS (Netherlands)

    Bams, Dennis; Bos, Jaap; Pisa, Magdalena

    2016-01-01

    Firms depend heavily on trade credit. This paper introduces a trade credit network into a structural model of the economy. In an empirical analysis of the model, we find that trade credit is an elusive insurance: as long as a firm is financially unconstrained and times are good, more trade credit

  17. Effects of trust fund model credit intervention on welfare of farmers ...

    African Journals Online (AJOL)

    ... recommended that the administrative bottlenecks associated with fund release and processing of interest drawback be addressed. Also, amount loanable should be increased, while condition of collateral counterpart funding be relaxed. Keywords: Agricultural credit, Per capital expenditure, Core poor, Household welfare ...

  18. Custom v. Standardized Risk Models

    Directory of Open Access Journals (Sweden)

    Zura Kakushadze

    2015-05-01

    Full Text Available We discuss when and why custom multi-factor risk models are warranted and give source code for computing some risk factors. Pension/mutual funds do not require customization but standardization. However, using standardized risk models in quant trading with much shorter holding horizons is suboptimal: (1 longer horizon risk factors (value, growth, etc. increase noise trades and trading costs; (2 arbitrary risk factors can neutralize alpha; (3 “standardized” industries are artificial and insufficiently granular; (4 normalization of style risk factors is lost for the trading universe; (5 diversifying risk models lowers P&L correlations, reduces turnover and market impact, and increases capacity. We discuss various aspects of custom risk model building.

  19. Model Risk in Portfolio Optimization

    Directory of Open Access Journals (Sweden)

    David Stefanovits

    2014-08-01

    Full Text Available We consider a one-period portfolio optimization problem under model uncertainty. For this purpose, we introduce a measure of model risk. We derive analytical results for this measure of model risk in the mean-variance problem assuming we have observations drawn from a normal variance mixture model. This model allows for heavy tails, tail dependence and leptokurtosis of marginals. The results show that mean-variance optimization is seriously compromised by model uncertainty, in particular, for non-Gaussian data and small sample sizes. To mitigate these shortcomings, we propose a method to adjust the sample covariance matrix in order to reduce model risk.

  20. Risk based modelling

    International Nuclear Information System (INIS)

    Chapman, O.J.V.; Baker, A.E.

    1993-01-01

    Risk based analysis is a tool becoming available to both engineers and managers to aid decision making concerning plant matters such as In-Service Inspection (ISI). In order to develop a risk based method, some form of Structural Reliability Risk Assessment (SRRA) needs to be performed to provide a probability of failure ranking for all sites around the plant. A Probabilistic Risk Assessment (PRA) can then be carried out to combine these possible events with the capability of plant safety systems and procedures, to establish the consequences of failure for the sites. In this way the probability of failures are converted into a risk based ranking which can be used to assist the process of deciding which sites should be included in an ISI programme. This paper reviews the technique and typical results of a risk based ranking assessment carried out for nuclear power plant pipework. (author)

  1. 49 CFR 536.4 - Credits.

    Science.gov (United States)

    2010-10-01

    ... OF TRANSPORTATION TRANSFER AND TRADING OF FUEL ECONOMY CREDITS § 536.4 Credits. (a) Type and vintage... category, and model year of origin (vintage). (b) Application of credits. All credits earned and applied are calculated, per 49 U.S.C. 32903(c), in tenths of a mile per gallon by which the average fuel...

  2. Portfolio Optimization for Multiple Group Credit Unions

    National Research Council Canada - National Science Library

    Willis, John

    1999-01-01

    ...) to diversify, credit unions now have the opportunity to market their services to specific employee groups or industries which can reduce the overall risk to the credit unions' health or solvency...

  3. 77 FR 17536 - Self-Regulatory Organizations; ICE Clear Credit LLC; Notice of Filing of Proposed Rule Change to...

    Science.gov (United States)

    2012-03-26

    ... Organizations; ICE Clear Credit LLC; Notice of Filing of Proposed Rule Change to Its Risk Model To Reduce the... Model so That It Is Easier for Market Participants To Measure Their Risk March 20, 2012. Pursuant to... is hereby given that on March 8, 2012, ICE Clear Credit LLC (``ICC'') filed with the Securities and...

  4. 互联网消费金融虚拟信用风险研究%Research on Risk of Virtual Credit of Internet′s Consumer Finance

    Institute of Scientific and Technical Information of China (English)

    肖振宇; 张杰; 谷瀛

    2016-01-01

    互联网虚拟信用具有授信依据信息有限、授信对象地域范围广、授信额度普遍较小、存在技术风险和冒用他人信息风险等特点。为促进互联网虚拟信用的发展,电商应当加强消费者诚信理念宣传,对部分商品可以实行按诚信等级来定价,加强网络安全技术建设和消费者的实名身份认证、培养专业的管理人才,政府需牵头建立统一的电商数据消费者数据收集平台,将消费者违约的数据纳入诚信管理系统。%The rapid development of Internet consumption led to the financial innovation of the Internet:Virtual Credit of In-ternet’s Consumer Finance.As a newly sprouted things,virtual credit of internet has some characteristics:credit on the ba-sis of information is limited,Credit object region is wide,Credit is generally small,it has technology risk and faking infor-mation risk of others.In order to promote the development of the Internet virtual credit,e— business should strengthen the concept of consumer credit ? propaganda,For part of commodity can be according to the grades of the good faith to pricing, strengthen the construction of network security technology and the real—name authentication of consumers,training profes-sional management talents.Government need to take the lead in establishing a unified electricity data data collection platfor, and take the consumer default data into the good faith management system.

  5. Conference Innovations in Derivatives Market : Fixed Income Modeling, Valuation Adjustments, Risk Management, and Regulation

    CERN Document Server

    Grbac, Zorana; Scherer, Matthias; Zagst, Rudi

    2016-01-01

    This book presents 20 peer-reviewed chapters on current aspects of derivatives markets and derivative pricing. The contributions, written by leading researchers in the field as well as experienced authors from the financial industry, present the state of the art in: • Modeling counterparty credit risk: credit valuation adjustment, debit valuation adjustment, funding valuation adjustment, and wrong way risk. • Pricing and hedging in fixed-income markets and multi-curve interest-rate modeling. • Recent developments concerning contingent convertible bonds, the measuring of basis spreads, and the modeling of implied correlations. The recent financial crisis has cast tremendous doubts on the classical view on derivative pricing. Now, counterparty credit risk and liquidity issues are integral aspects of a prudent valuation procedure and the reference interest rates are represented by a multitude of curves according to their different periods and maturities. A panel discussion included in the book (featuring D...

  6. Strategic production modeling for defective items with imperfect inspection process, rework, and sales return under two-level trade credit

    Directory of Open Access Journals (Sweden)

    Aditi Khanna

    2017-01-01

    Full Text Available Quality decisions are one of the major decisions in inventory management. It affects customer’s demand, loyalty and customer satisfaction and also inventory costs. Every manufacturing process is inherent to have some chance causes of variation which may lead to some defectives in the lot. So, in order to cater the customers with faultless products, an inspection process is inevitable, which may also be prone to errors. Thus for an operations manager, maintaining the quality of the lot and the screening process becomes a challenging task, when his objective is to determine the optimal order quantity for the inventory system. Besides these operational tasks, the goal is also to increase the customer base which eventually leads to higher profits. So, as a promotional tool, trade credit is being offered by both the retailer and supplier to their respective customers to encourage more frequent and higher volume purchases. Thus taking into account of these facts, a strategic production model is formulated here to study the combined effects of imperfect quality items, faulty inspection process, rework process, sales return under two level trade credit. The present study is a general framework for many articles and classical EPQ model. An analytical method is employed which jointly optimizes the retailer’s credit period and order quantity, so as to maximize the expected total profit per unit time. To study the behavior and application of the model, a numerical example has been cited and a comprehensive sensitivity analysis has been performed. The model can be widely applicable in manufacturing industries like textile, footwear, plastics, electronics, furniture etc.

  7. An eoq model for weibull deteriorating item with ramp type demand and salvage value under trade credit system

    Directory of Open Access Journals (Sweden)

    Lalit Mohan Pradhan

    2014-03-01

    Full Text Available Background: In the present competitive business scenario researchers have developed various inventory models for deteriorating items considering various practical situations for better inventory control. Permissible delay in payments with various demands and deteriorations is considerably a new concept introduced in developing various inventory models. These models are very useful for both the consumers and the manufacturer. Methods: In the present work an inventory model has been developed for a three parameter Weibull deteriorating item with ramp type demand and salvage value under trade credit system. Here we have considered a single item for developing the model. Results and conclusion: Optimal order quantity, optimal cycle time and total variable cost during a cycle have been derived for the proposed inventory model. The results obtained in this paper have been illustrated with the help of numerical examples and sensitivity analysis.   

  8. Wildfire Risk Main Model

    Data.gov (United States)

    Earth Data Analysis Center, University of New Mexico — The model combines three modeled fire behavior parameters (rate of spread, flame length, crown fire potential) and one modeled ecological health measure (fire regime...

  9. EFFICIENCY OF CREDIT PORTFOLIO MANAGEMENT IN CONDITIONS OF ECONOMIC INSTABILITY

    Directory of Open Access Journals (Sweden)

    Koshel H.

    2018-01-01

    Full Text Available Introduction. The active development of integration processes causes the necessity of applying high-level approaches to management of the banking system, which is an essential part of the financial sector. Due to the importance of credit operations in the portfolio of banking assets, development of efficient and flexible credit management system is the basis for financial and market stability of banks. Purpose. Analyze the condition of the credit portfolio of banking institutions under the influence of economic processes and make conclusions and recommendations about the effectiveness of managing the bank’s credit portfolio and generalize ways of improving the structure and quality of the bank’s credit portfolio. Results. Over the last six years, the quality of the credit portfolio has become worse because of the bad debts growing and, as a result, decreasing in revenues. The calculated coefficient of management efficiency of a credit portfolio shows the dependence of this indicator on the value of risk and yield. In order to confirm the dependence and determine the degree of influence of these indicators on the efficiency of management of a loan portfolio, an economic-mathematical model was constructed on the example of both individual banks and the banking system as a whole. Detected dependence of factors is quite logical, therefore, the model can be recommended for practical use. Conclusion. Using this method of determining the management efficiency of a credit portfolio will allow the management of the bank to make reasonable decisions. It will allow the possibility of forming a more justified credit portfolio, taking into account not only the profitability, but also the real level of risk of credit operations.

  10. The EPQ model under conditions of two levels of trade credit and limited storage capacity in supply chain management

    Science.gov (United States)

    Chung, Kun-Jen

    2013-09-01

    An inventory problem involves a lot of factors influencing inventory decisions. To understand it, the traditional economic production quantity (EPQ) model plays rather important role for inventory analysis. Although the traditional EPQ models are still widely used in industry, practitioners frequently question validities of assumptions of these models such that their use encounters challenges and difficulties. So, this article tries to present a new inventory model by considering two levels of trade credit, finite replenishment rate and limited storage capacity together to relax the basic assumptions of the traditional EPQ model to improve the environment of the use of it. Keeping in mind cost-minimisation strategy, four easy-to-use theorems are developed to characterise the optimal solution. Finally, the sensitivity analyses are executed to investigate the effects of the various parameters on ordering policies and the annual total relevant costs of the inventory system.

  11. An EOQ model for a deteriorating item with non-linear demand under inflation and a trade credit policy

    Directory of Open Access Journals (Sweden)

    Manna S.K.

    2005-01-01

    Full Text Available This paper develops an infinite time-horizon deterministic economic order quantity (EOQ inventory model with deterioration based on discounted cash flows (DCF approach where demand rate is assumed to be non-linear over time. The effects of inflation and time-value of money are also taken into account under a trade-credit policy of type "α/T1 net T". The results are illustrated with a numerical example. Sensitivity analysis of the optimal solution with respect to the parameters of the system is carried out.

  12. Credit Card Fraud Detection: A Realistic Modeling and a Novel Learning Strategy.

    Science.gov (United States)

    Dal Pozzolo, Andrea; Boracchi, Giacomo; Caelen, Olivier; Alippi, Cesare; Bontempi, Gianluca

    2017-09-14

    Detecting frauds in credit card transactions is perhaps one of the best testbeds for computational intelligence algorithms. In fact, this problem involves a number of relevant challenges, namely: concept drift (customers' habits evolve and fraudsters change their strategies over time), class imbalance (genuine transactions far outnumber frauds), and verification latency (only a small set of transactions are timely checked by investigators). However, the vast majority of learning algorithms that have been proposed for fraud detection rely on assumptions that hardly hold in a real-world fraud-detection system (FDS). This lack of realism concerns two main aspects: 1) the way and timing with which supervised information is provided and 2) the measures used to assess fraud-detection performance. This paper has three major contributions. First, we propose, with the help of our industrial partner, a formalization of the fraud-detection problem that realistically describes the operating conditions of FDSs that everyday analyze massive streams of credit card transactions. We also illustrate the most appropriate performance measures to be used for fraud-detection purposes. Second, we design and assess a novel learning strategy that effectively addresses class imbalance, concept drift, and verification latency. Third, in our experiments, we demonstrate the impact of class unbalance and concept drift in a real-world data stream containing more than 75 million transactions, authorized over a time window of three years.

  13. Modelling allergenic risk

    DEFF Research Database (Denmark)

    Birot, Sophie

    combines second order Monte-Carlo simulations with Bayesian inferences [13]. An alternative method using second order Monte-Carlo simulations was proposed to take into account the uncertainty from the inputs. The uncertainty propagation from the inputs to the risk of allergic reaction was also evaluated...... countries is proposed. Thus, the allergen risk assessment can be performed cross-nationally and for the correct food group. Then the two probabilistic risk assessment methods usually used were reviewed and compared. First order Monte-Carlo simulations are used in one method [14], whereas the other one......Up to 20 million Europeans suffer from food allergies. Due to the lack of knowledge about why food allergies developed or how to protect allergic consumers from the offending food, food allergy management is mainly based on food allergens avoidance. The iFAAM project (Integrated approaches to Food...

  14. Split credit ratings and the prediction of bank ratings in the Basel II environment

    OpenAIRE

    Barton, Amanda

    2006-01-01

    This thesis investigates two aspects of credit risk measurement in the context of Basel 11: The International Convergence of Capital Measurement and Capital Standards. The first is the problem arising when two credit rating agencies disagree over the rating assigned to an issuer and a split rating arises. The second area is the determination of internal credit rating models for use under the Internal ratings-based approach. This thesis presents a variety of bank rating modes for individual an...

  15. A Tentative Analysis of the Use of Potential by Commercial Bank in Controlling Credit Scale

    Institute of Scientific and Technical Information of China (English)

    YANG Wen-ze

    2008-01-01

    This article brings forward the conception of potential and filed potential in bank's competition under the inspiration of law of electric current in electrodynamics.It discusses the impact of potential shifting on commercial bank's credit scale and builds up a model for commercial bank to control the scale by credit pricing and risk policy in a dynamic way, and also gives some advice to domestic commercial bank for improving loan business, aiming to settle down the existing credit management problems.

  16. Efficacy of Online Algebra I for Credit Recovery for At-Risk Ninth Grade Students: Evidence from Year 1

    Science.gov (United States)

    Heppen, Jessica; Allensworth, Elaine; Walters, Kirk; Pareja, Amber Stitziel; Kurki, Anja; Nomi, Takako; Sorensen, Nicholas

    2012-01-01

    This study is an efficacy trial funded by a grant from the Institute of Education Sciences (IES) National Center for Education Research (NCER). Fifteen CPS high schools are receiving funding to implement two Algebra I credit recovery courses during the summer sessions of 2011 and 2012--one online and one face-to-face (f2f). These courses allow…

  17. Credit concession through credit scoring: Analysis and application proposal

    Directory of Open Access Journals (Sweden)

    Oriol Amat

    2017-01-01

    Full Text Available Purpose: The study herein develops and tests a credit scoring model which can help financial institutions in assessing credit requests.  Design/methodology/approach: The empirical study has the objective of answering two questions: (1 Which ratios better discriminate the companies based on their being solvent or insolvent? and (2 What is the relative importance of these ratios? To do this, several statistical techniques with a multifactorial focus have been used (Multivariate Analysis of Variance, Linear Discriminant Analysis, Logit and Probit Models. Several samples of companies have been used in order to obtain and to test the model.  Findings: Through the application of several statistical techniques, the credit scoring model has been proved to be effective in discriminating between good and bad creditors.  Research limitations:  This study focuses on manufacturing, commercial and services companies of all sizes in Spain; Therefore, the conclusions may differ for other geographical locations. Practical implications:  Because credit is one of the main drivers of growth, a solid credit scoring model can help financial institutions assessing to whom to grant credit and to whom not to grant credit. Social implications: Because of the growing importance of credit for our society and the fear of granting it due to the latest financial turmoil, a solid credit scoring model can strengthen the trust toward the financial institutions assessment’s.  Originality/value: There is already a stream of literature related to credit scoring. However, this paper focuses on Spanish firms and proves the results of our model based on real data. The application of the model to detect the probability of default in loans is original.

  18. Asset backed securities : risks, ratings and quantitative modelling

    NARCIS (Netherlands)

    Jönsson, B.H.B.; Schoutens, W.

    2009-01-01

    Asset backed securities (ABSs) are structured finance products backed by pools of assets and are created through a securitisation process. The risks in asset backed securities, such as, credit risk, prepayment risk, market risks, operational risk, and legal risks, are directly connected with the

  19. An Economic Order Quantity Model with Completely Backordering and Nondecreasing Demand under Two-Level Trade Credit

    Directory of Open Access Journals (Sweden)

    Zohreh Molamohamadi

    2014-01-01

    Full Text Available In the traditional inventory system, it was implicitly assumed that the buyer pays to the seller as soon as he receives the items. In today’s competitive industry, however, the seller usually offers the buyer a delay period to settle the account of the goods. Not only the seller but also the buyer may apply trade credit as a strategic tool to stimulate his customers’ demands. This paper investigates the effects of the latter policy, two-level trade credit, on a retailer’s optimal ordering decisions within the economic order quantity framework and allowable shortages. Unlike most of the previous studies, the demand function of the customers is considered to increase with time. The objective of the retailer’s inventory model is to maximize the profit. The replenishment decisions optimally are obtained using genetic algorithm. Two special cases of the proposed model are discussed and the impacts of parameters on the decision variables are finally investigated. Numerical examples demonstrate the profitability of the developed two-level supply chain with backorder.

  20. Using Marginal Structural Modeling to Estimate the Cumulative Impact of an Unconditional Tax Credit on Self-Rated Health.

    Science.gov (United States)

    Pega, Frank; Blakely, Tony; Glymour, M Maria; Carter, Kristie N; Kawachi, Ichiro

    2016-02-15

    In previous studies, researchers estimated short-term relationships between financial credits and health outcomes using conventional regression analyses, but they did not account for time-varying confounders affected by prior treatment (CAPTs) or the credits' cumulative impacts over time. In this study, we examined the association between total number of years of receiving New Zealand's Family Tax Credit (FTC) and self-rated health (SRH) in 6,900 working-age parents using 7 waves of New Zealand longitudinal data (2002-2009). We conducted conventional linear regression analyses, both unadjusted and adjusted for time-invariant and time-varying confounders measured at baseline, and fitted marginal structural models (MSMs) that more fully adjusted for confounders, including CAPTs. Of all participants, 5.1%-6.8% received the FTC for 1-3 years and 1.8%-3.6% for 4-7 years. In unadjusted and adjusted conventional regression analyses, each additional year of receiving the FTC was associated with 0.033 (95% confidence interval (CI): -0.047, -0.019) and 0.026 (95% CI: -0.041, -0.010) units worse SRH (on a 5-unit scale). In the MSMs, the average causal treatment effect also reflected a small decrease in SRH (unstabilized weights: β = -0.039 unit, 95% CI: -0.058, -0.020; stabilized weights: β = -0.031 unit, 95% CI: -0.050, -0.007). Cumulatively receiving the FTC marginally reduced SRH. Conventional regression analyses and MSMs produced similar estimates, suggesting little bias from CAPTs. © The Author 2016. Published by Oxford University Press on behalf of the Johns Hopkins Bloomberg School of Public Health. All rights reserved. For permissions, please e-mail: journals.permissions@oup.com.

  1. An EOQ model of time quadratic and inventory dependent demand for deteriorated items with partially backlogged shortages under trade credit

    Science.gov (United States)

    Singh, Pushpinder; Mishra, Nitin Kumar; Singh, Vikramjeet; Saxena, Seema

    2017-07-01

    In this paper a single buyer, single supplier inventory model with time quadratic and stock dependent demand for a finite planning horizon has been studied. Single deteriorating item which suffers shortage, with partial backlogging and some lost sales is considered. Model is divided into two scenarios, one with non permissible delay in payment and other with permissible delay in payment. Latter is called, centralized system, where supplier offers trade credit to retailer. In the centralized system cost saving is shared amongst the two. The objective is to study the difference in minimum costs borne by retailer and supplier, under two scenarios including the above mentioned parameters. To obtain optimal solution of the problem the model is solved analytically. Numerical example and a comparative study are then discussed supported by sensitivity analysis of each parameter.

  2. An open Markov chain scheme model for a credit consumption portfolio fed by ARIMA and SARMA processes

    Science.gov (United States)

    Esquível, Manuel L.; Fernandes, José Moniz; Guerreiro, Gracinda R.

    2016-06-01

    We introduce a schematic formalism for the time evolution of a random population entering some set of classes and such that each member of the population evolves among these classes according to a scheme based on a Markov chain model. We consider that the flow of incoming members is modeled by a time series and we detail the time series structure of the elements in each of the classes. We present a practical application to data from a credit portfolio of a Cape Verdian bank; after modeling the entering population in two different ways - namely as an ARIMA process and as a deterministic sigmoid type trend plus a SARMA process for the residues - we simulate the behavior of the population and compare the results. We get that the second method is more accurate in describing the behavior of the populations when compared to the observed values in a direct simulation of the Markov chain.

  3. Multilevel joint competing risk models

    Science.gov (United States)

    Karunarathna, G. H. S.; Sooriyarachchi, M. R.

    2017-09-01

    Joint modeling approaches are often encountered for different outcomes of competing risk time to event and count in many biomedical and epidemiology studies in the presence of cluster effect. Hospital length of stay (LOS) has been the widely used outcome measure in hospital utilization due to the benchmark measurement for measuring multiple terminations such as discharge, transferred, dead and patients who have not completed the event of interest at the follow up period (censored) during hospitalizations. Competing risk models provide a method of addressing such multiple destinations since classical time to event models yield biased results when there are multiple events. In this study, the concept of joint modeling has been applied to the dengue epidemiology in Sri Lanka, 2006-2008 to assess the relationship between different outcomes of LOS and platelet count of dengue patients with the district cluster effect. Two key approaches have been applied to build up the joint scenario. In the first approach, modeling each competing risk separately using the binary logistic model, treating all other events as censored under the multilevel discrete time to event model, while the platelet counts are assumed to follow a lognormal regression model. The second approach is based on the endogeneity effect in the multilevel competing risks and count model. Model parameters were estimated using maximum likelihood based on the Laplace approximation. Moreover, the study reveals that joint modeling approach yield more precise results compared to fitting two separate univariate models, in terms of AIC (Akaike Information Criterion).

  4. Earned Income Tax Credit

    NARCIS (Netherlands)

    F.M. van Oers; R.A. de Mooij (Ruud)

    1998-01-01

    textabstractIn recent policy discussions in the Netherlands, the Earned Income Tax Credit (EITC) has been put forward as an effective instrument to reduce the unemployment rate among low-skilled workers. Using the MIMIC model, this article shows that a targeted EITC at low incomes indeed seems

  5. Prostate Cancer Risk Prediction Models

    Science.gov (United States)

    Developing statistical models that estimate the probability of developing prostate cancer over a defined period of time will help clinicians identify individuals at higher risk of specific cancers, allowing for earlier or more frequent screening and counseling of behavioral changes to decrease risk.

  6. Colorectal Cancer Risk Prediction Models

    Science.gov (United States)

    Developing statistical models that estimate the probability of developing colorectal cancer over a defined period of time will help clinicians identify individuals at higher risk of specific cancers, allowing for earlier or more frequent screening and counseling of behavioral changes to decrease risk.

  7. Esophageal Cancer Risk Prediction Models

    Science.gov (United States)

    Developing statistical models that estimate the probability of developing esophageal cancer over a defined period of time will help clinicians identify individuals at higher risk of specific cancers, allowing for earlier or more frequent screening and counseling of behavioral changes to decrease risk.

  8. Bladder Cancer Risk Prediction Models

    Science.gov (United States)

    Developing statistical models that estimate the probability of developing bladder cancer over a defined period of time will help clinicians identify individuals at higher risk of specific cancers, allowing for earlier or more frequent screening and counseling of behavioral changes to decrease risk.

  9. Lung Cancer Risk Prediction Models

    Science.gov (United States)

    Developing statistical models that estimate the probability of developing lung cancer over a defined period of time will help clinicians identify individuals at higher risk of specific cancers, allowing for earlier or more frequent screening and counseling of behavioral changes to decrease risk.

  10. Breast Cancer Risk Prediction Models

    Science.gov (United States)

    Developing statistical models that estimate the probability of developing breast cancer over a defined period of time will help clinicians identify individuals at higher risk of specific cancers, allowing for earlier or more frequent screening and counseling of behavioral changes to decrease risk.

  11. Pancreatic Cancer Risk Prediction Models

    Science.gov (United States)

    Developing statistical models that estimate the probability of developing pancreatic cancer over a defined period of time will help clinicians identify individuals at higher risk of specific cancers, allowing for earlier or more frequent screening and counseling of behavioral changes to decrease risk.

  12. Ovarian Cancer Risk Prediction Models

    Science.gov (United States)

    Developing statistical models that estimate the probability of developing ovarian cancer over a defined period of time will help clinicians identify individuals at higher risk of specific cancers, allowing for earlier or more frequent screening and counseling of behavioral changes to decrease risk.

  13. Liver Cancer Risk Prediction Models

    Science.gov (United States)

    Developing statistical models that estimate the probability of developing liver cancer over a defined period of time will help clinicians identify individuals at higher risk of specific cancers, allowing for earlier or more frequent screening and counseling of behavioral changes to decrease risk.

  14. Testicular Cancer Risk Prediction Models

    Science.gov (United States)

    Developing statistical models that estimate the probability of testicular cervical cancer over a defined period of time will help clinicians identify individuals at higher risk of specific cancers, allowing for earlier or more frequent screening and counseling of behavioral changes to decrease risk.

  15. Cervical Cancer Risk Prediction Models

    Science.gov (United States)

    Developing statistical models that estimate the probability of developing cervical cancer over a defined period of time will help clinicians identify individuals at higher risk of specific cancers, allowing for earlier or more frequent screening and counseling of behavioral changes to decrease risk.

  16. A relative risk comparison of criticality control strategies based on fresh fuel and burnup credit design bases

    International Nuclear Information System (INIS)

    Sanders, T.L.

    1988-01-01

    The proposed use of burnup credit in spent fuel cask design and operation represents a departure from current regulatory practice, and creates technical issues that ultimately must be resolved for the concept to be implemented. Issues related to specific technical considerations can generally be resolved conclusively. However, an underlying perception may still exist that the use of burnup credit compromises criticality safety. In practice, individual casks are designed to satisfy regulatory requirements in a generally conservative manner. The designer's application of the regulatory requirements involves some engineering judgement, as does the regulator's implementation of them. This does not have an adverse effect on safety, but does make it difficult to objectively compare new or alternative designs and/or operating approaches. 5 refs., 7 figs., 2 tabs

  17. Risk modelling in portfolio optimization

    Science.gov (United States)

    Lam, W. H.; Jaaman, Saiful Hafizah Hj.; Isa, Zaidi

    2013-09-01

    Risk management is very important in portfolio optimization. The mean-variance model has been used in portfolio optimization to minimize the investment risk. The objective of the mean-variance model is to minimize the portfolio risk and achieve the target rate of return. Variance is used as risk measure in the mean-variance model. The purpose of this study is to compare the portfolio composition as well as performance between the optimal portfolio of mean-variance model and equally weighted portfolio. Equally weighted portfolio means the proportions that are invested in each asset are equal. The results show that the portfolio composition of the mean-variance optimal portfolio and equally weighted portfolio are different. Besides that, the mean-variance optimal portfolio gives better performance because it gives higher performance ratio than the equally weighted portfolio.

  18. Models for Pesticide Risk Assessment

    Science.gov (United States)

    EPA considers the toxicity of the pesticide as well as the amount of pesticide to which a person or the environments may be exposed in risk assessment. Scientists use mathematical models to predict pesticide concentrations in exposure assessment.

  19. WHAT INFLUENCE CREDIT CARD DEBTS IN YOUNG CONSUMERS IN MALAYSIA

    OpenAIRE

    Syed Shah ALAM; Ruzita Abdul RAHIM; Ridhwanul HAQ; Atiqur Rahman KHAN

    2014-01-01

    This paper examines empirically antecedents of the credit card debts in young consumers in Malaysia. We examine whether easy access to credit card, credit card related knowledge, aggressive promotion by credit card industry, low minimum payment requirement and attitude towards credit cards influence credit card debts in the younger generation. Regression model was used to meet the objectives. These findings based on a sample of 240 young credit card holders, show that the factors that affect ...

  20. Efficacy of Online Algebra I for Credit Recovery for At-Risk Ninth Graders: Consistency of Results from Two Cohorts

    Science.gov (United States)

    Heppen, Jessica; Sorensen, Nicholas; Allensworth, Elaine; Walters, Kirk; Stachel, Suzanne; Michelman, Valerie

    2012-01-01

    The consequences of failing core academic courses during the first year of high school are dire. In the Chicago Public Schools (CPS), only about one-fifth of off-track freshmen--students who fail more than one semester of a core academic course and/or fail to earn enough credits to be promoted to 10th grade--graduate high school, compared with…

  1. Savings and credit: women's informal groups as models for change in developing countries.

    Science.gov (United States)

    Wickrama, K A; Keith, P M

    1994-04-01

    The aim of this research was to examine the financial success of newly formed women's groups involved in Sri Lanka's Hambantota Integrated Rural Development Program (HIRDEP). The project was initiated in July 1986 with 20 trained social mobilizers, who were each assigned to a village community of about 100 families. Mobilizers were selected from village volunteers involved in development activities. The study population included 78 women's groups, with an average size of 7 persons, from 19 villages with populations under the poverty level and people receiving food stamps. Measures of group performance included the exchange of labor among group members, the collective purchase of raw materials and consumer goods, and collective marketing. Service use was differentiated by extension services, inputs, assets, and general benefits. Financial activity was measured as the rupee size of the fund and amounts of loans. 54 groups were engaged in nonfarm activity, and most groups had women social mobilizers. About 50% of women's groups had received all four service types. Funding ranged from Rs. 240 to Rs. 9500. The average of the credit loans per month was Rs. 408 per group. 85% of the loans were used for production, investment, or repayment of old loans. Younger age groups affected the slower growth of funds but were more efficient in loaning money, acquiring services, and marketing activities collectively. Young social mobilizers were associated with efficiency of credit disbursement. Diversity of collective activities was related to the size and growth rate of funds. Multivariate analysis revealed that the growth rate of funds was primarily related to the personal income of members and the level of training of social mobilizers. Members were able to obtain loans equal to about 50% of their monthly income at an average interest rate of about 5%, which was three to four times less than normally available. 47% of the variance in the size of the fund was explained by average

  2. ANALYSIS OF MODELS OF EARLY DEBT REPAYMENT IN THE Generalized CREDIT TRANSACTIONS

    Directory of Open Access Journals (Sweden)

    2016-01-01

    Full Text Available This paper analyzes the patterns of early repayment in multi-period credit transactions. Considered one of the most common ways of conversion of unpaid interest for early repayment, so-called 78 rule. The relationship of this rule with the linear approximation of the exact value; redeemable debt is determined. The analysis of the maximum excess payment of interest on 78 rule. It has been shown how interest payment on 78 rule depended on the time of early repayment. Early repayment of debt is an agreement under which the borrower pays to the lender amount of money equal to the current balance (as of loan account. Then further regular payments cease and the contract terminates. However, the amount of outstanding debt is determined by the structure of prescription charges. So in the uniform schemes of repayment of consumer credit each payment contains the same part of principal amounts and the total interest. In case of early repayment the Bank loses a significant fraction of the expected interest payments. Therefore, in practice, often used so-called accelerated schemes of interest payments. One of them is 78 rule. Use the 78 rule is simple and straightforward. The name of the rule is due to the fact that the sum of the numbers 12 monthly payments is 78. In the schemes of consumer loan with a term of one year interest payment for the current month is equal to m/78 of the total amount of interest payments, where m is the number of remaining payments. The rule name is stored and in the more general case with an arbitrary number of payments. In general interest payment is determined by the relative weight of the total amount of interest in each payment. In uniform schemes it is constant. In accelerated with a particular speed decreases. Therefore, additional cash expenses by the 78 rule may be considered as additional penalties for early repayment of the debt. It this article is shown how this penalty depends on time before maturity. It is shown that

  3. Application of the business model Canvas in Microenterprises from Partners of the Savings and Credit Cooperative Luz del Valle

    Directory of Open Access Journals (Sweden)

    Francisco Javier Monroy Espinosa

    2017-12-01

    Full Text Available The "Luz del Valle" Savings and Credit Cooperative is a financial institution with five thousand microentrepreneurial partners who have business units. These business units, generally informal, do not have a defined organizational structure or adequate management tools, which influences in the presence of economic problems such as arrears and non-payment of contracted obligations, mainly as a result of a low level of sales. Due to this situation, it is important for cooperatives to support their partners in finding solutions. This is part of the cooperative principles and values of mutual aid, social responsibility and education, training and information for its members, team leaders, managers and employees; these universal principles established by the International Cooperative Alliance (ICA are considered by the savings and credit cooperative "Luz del Valle" as strategies to accompany its partners in the development and growth of their business units. The cooperative organizes a Christmas Fair annually, where 60 microentrepreneurs participate. This event was the opportunity to develop, together with the Metropolitan University of Ecuador, a project that, in its first phase, trained in the formulation of strategies based on the application of the Business Model Canvas; the teaching of this tool, which allows creating, capturing and providing value for clients, was supported by the university community and the program of linkage with society that develops the aforementioned institution; the evaluation of the impact and the economic results are contemplated in a second phase.

  4. 77 FR 52977 - Regulatory Capital Rules: Advanced Approaches Risk-Based Capital Rule; Market Risk Capital Rule

    Science.gov (United States)

    2012-08-30

    ...-weighted assets for residential mortgages, securitization exposures, and counterparty credit risk. The.... Risk-Weighted Assets--Proposed Modifications to the Advanced Approaches Rules A. Counterparty Credit... Margin Period of Risk 3. Changes to the Internal Models Methodology (IMM) 4. Credit Valuation Adjustments...

  5. 12 CFR 614.4125 - Funding and discount relationships between Farm Credit Banks or agricultural credit banks and...

    Science.gov (United States)

    2010-01-01

    ..., Risk Management, Farm Credit System Insurance Corporation. (f) A direct lender association shall... Administration office that the Chief Examiner designates, and the Director, Risk Management, Farm Credit System... Credit Banks or agricultural credit banks and direct lender associations. 614.4125 Section 614.4125 Banks...

  6. Modeling renewable energy company risk

    International Nuclear Information System (INIS)

    Sadorsky, Perry

    2012-01-01

    The renewable energy sector is one of the fastest growing components of the energy industry and along with this increased demand for renewable energy there has been an increase in investing and financing activities. The tradeoff between risk and return in the renewable energy sector is, however, precarious. Renewable energy companies are often among the riskiest types of companies to invest in and for this reason it is necessary to have a good understanding of the risk factors. This paper uses a variable beta model to investigate the determinants of renewable energy company risk. The empirical results show that company sales growth has a negative impact on company risk while oil price increases have a positive impact on company risk. When oil price returns are positive and moderate, increases in sales growth can offset the impact of oil price returns and this leads to lower systematic risk.

  7. Default risk modeling beyond the first-passage approximation: Extended Black-Cox model

    Science.gov (United States)

    Katz, Yuri A.; Shokhirev, Nikolai V.

    2010-07-01

    We develop a generalization of the Black-Cox structural model of default risk. The extended model captures uncertainty related to firm’s ability to avoid default even if company’s liabilities momentarily exceeding its assets. Diffusion in a linear potential with the radiation boundary condition is used to mimic a company’s default process. The exact solution of the corresponding Fokker-Planck equation allows for derivation of analytical expressions for the cumulative probability of default and the relevant hazard rate. Obtained closed formulas fit well the historical data on global corporate defaults and demonstrate the split behavior of credit spreads for bonds of companies in different categories of speculative-grade ratings with varying time to maturity. Introduction of the finite rate of default at the boundary improves valuation of credit risk for short time horizons, which is the key advantage of the proposed model. We also consider the influence of uncertainty in the initial distance to the default barrier on the outcome of the model and demonstrate that this additional source of incomplete information may be responsible for nonzero credit spreads for bonds with very short time to maturity.

  8. Production inventory model for two-level trade credit financing under the effect of preservation technology and learning in supply chain

    Directory of Open Access Journals (Sweden)

    Sunil Kumar

    2015-12-01

    Full Text Available The present study investigated the inventory model for a retailer under two levels of trade credit to reflect the supply chain management. Supplier offers trade credit period of M to the retailer while in turn retailer provides a trade credit period of N to his/her customers. The supplier is willing to provide the retailer a full trade credit period for payments and the retailer offers the partial trade credit period to his/her customers. Here, selling items are considered as perishable items such as fruits, fresh fishes, gasoline, photographic films, etc. so that its potential worth decreases. It is assumed that decay in potential worth of items can be increased by using preservation technology. The demand is considered as the function of selling price and trade credit. Ordering cost can be reducing due to learning by doing phenomenon. By applying convex fractional programming results, we obtain necessary and sufficient conditions of an optimal solution. Some theorems are developed to determine retailer’s optimal ordering policies and numerical examples are given to illustrate these theorems. In addition, some managerial insights from the numerical examples are also concluded.

  9. An Inventory Model for Deteriorating Item with Reliability Consideration and Trade Credit

    Directory of Open Access Journals (Sweden)

    S. R. Singh

    2014-10-01

    Full Text Available In today’s global market every body want to buy products of high level quality and to achieve a high level product quality supplier have to invest in improving reliability of production process. In present article we have studies reliable production process with stock dependent unit production and holding cost. Demand is exponential function of time and infinite production process wit non- instantaneous deterioration rate are considered in this paper. Whole study has been done under the effect of trade credit. The main objective of this paper is to optimize the total relevant cost for reliable production process. Numerical example and sensitivity analysis is given at the end of this paper.   Normal 0 false false false EN-US X-NONE X-NONE /* Style Definitions */ table.MsoNormalTable {mso-style-name:"Table Normal"; mso-tstyle-rowband-size:0; mso-tstyle-colband-size:0; mso-style-noshow:yes; mso-style-priority:99; mso-style-qformat:yes; mso-style-parent:""; mso-padding-alt:0in 5.4pt 0in 5.4pt; mso-para-margin-top:0in; mso-para-margin-right:0in; mso-para-margin-bottom:10.0pt; mso-para-margin-left:0in; line-height:115%; mso-pagination:widow-orphan; font-size:11.0pt; font-family:"Calibri","sans-serif"; mso-ascii-font-family:Calibri; mso-ascii-theme-font:minor-latin; mso-fareast-font-family:"Times New Roman"; mso-fareast-theme-font:minor-fareast; mso-hansi-font-family:Calibri; mso-hansi-theme-font:minor-latin;}

  10. Credit scoring using ensemble of various classifiers on reduced feature set

    Directory of Open Access Journals (Sweden)

    Dahiya Shashi

    2015-01-01

    Full Text Available Credit scoring methods are widely used for evaluating loan applications in financial and banking institutions. Credit score identifies if applicant customers belong to good risk applicant group or a bad risk applicant group. These decisions are based on the demographic data of the customers, overall business by the customer with bank, and loan payment history of the loan applicants. The advantages of using credit scoring models include reducing the cost of credit analysis, enabling faster credit decisions and diminishing possible risk. Many statistical and machine learning techniques such as Logistic Regression, Support Vector Machines, Neural Networks and Decision tree algorithms have been used independently and as hybrid credit scoring models. This paper proposes an ensemble based technique combining seven individual models to increase the classification accuracy. Feature selection has also been used for selecting important attributes for classification. Cross classification was conducted using three data partitions. German credit dataset having 1000 instances and 21 attributes is used in the present study. The results of the experiments revealed that the ensemble model yielded a very good accuracy when compared to individual models. In all three different partitions, the ensemble model was able to classify more than 80% of the loan customers as good creditors correctly. Also, for 70:30 partition there was a good impact of feature selection on the accuracy of classifiers. The results were improved for almost all individual models including the ensemble model.

  11. The Impact of E-Education on At Risk High School Students' Science Achievement and Experiences during Summer School Credit Recovery Courses

    Science.gov (United States)

    Phillips, Pamela Prevette

    Nationally, at risk students make up to 30% of U.S. students in public schools. Many at risk students have poor attendance, are disengaged from the learning environment and have low academic achievement. Educational failure occurs when students do not complete the required courses and as a result do not receive a high school diploma or a certificate of attendance. Many at risk students will not graduate; nearly one-third of all United States high school students have left the public school system before graduating, which has been referred to as a national crisis. Many at risk students fail science courses that are required for graduation, such as biology. Clearly, many students are not responding positively to the conditions in many public school classrooms, suggesting the need for different methods of educating at risk students, such as e-education. Three research questions guided the study: 1) Who are the students in an e-education, online summer school credit recovery course? 2) Do students' beliefs about their learning environment or other personal factors influence their academic achievement?, and 3) How do students describe their experiences of an e-education science course? This mixed methods study investigates thirty-two at risk students who were enrolled in one of three e-education science education courses (biology, earth science, and physical science) during a summer session in a rural county in a southeastern US state. These students failed their most recent science course taken in a traditional classroom setting. Artino's (2010) social-cognitive model of academic motivation and emotion was used as a theoretical framework to highlight the salient motivational factors toward learning science (e.g., task characteristics, task value beliefs, positive emotions). Student data included pre and post tests for all e-education lessons, a final exam, survey data (Students Motivation towards Science Learning (SMTSL), time (on task and idle), field notes, and

  12. Item and response-category functioning of the Persian version of the KIDSCREEN-27: Rasch partial credit model

    Directory of Open Access Journals (Sweden)

    Jafari Peyman

    2012-10-01

    Full Text Available Abstract Background The purpose of the study was to determine whether the Persian version of the KIDSCREEN-27 has the optimal number of response category to measure health-related quality of life (HRQoL in children and adolescents. Moreover, we aimed to determine if all the items contributed adequately to their own domain. Findings The Persian version of the KIDSCREEN-27 was completed by 1083 school children and 1070 of their parents. The Rasch partial credit model (PCM was used to investigate item statistics and ordering of response categories. The PCM showed that no item was misfitting. The PCM also revealed that, successive response categories for all items were located in the expected order except for category 1 in self- and proxy-reports. Conclusions Although Rasch analysis confirms that all the items belong to their own underlying construct, response categories should be reorganized and evaluated in further studies, especially in children with chronic conditions.

  13. Information risk and security modeling

    Science.gov (United States)

    Zivic, Predrag

    2005-03-01

    This research paper presentation will feature current frameworks to addressing risk and security modeling and metrics. The paper will analyze technical level risk and security metrics of Common Criteria/ISO15408, Centre for Internet Security guidelines, NSA configuration guidelines and metrics used at this level. Information IT operational standards view on security metrics such as GMITS/ISO13335, ITIL/ITMS and architectural guidelines such as ISO7498-2 will be explained. Business process level standards such as ISO17799, COSO and CobiT will be presented with their control approach to security metrics. Top level, the maturity standards such as SSE-CMM/ISO21827, NSA Infosec Assessment and CobiT will be explored and reviewed. For each defined level of security metrics the research presentation will explore the appropriate usage of these standards. The paper will discuss standards approaches to conducting the risk and security metrics. The research findings will demonstrate the need for common baseline for both risk and security metrics. This paper will show the relation between the attribute based common baseline and corporate assets and controls for risk and security metrics. IT will be shown that such approach spans over all mentioned standards. The proposed approach 3D visual presentation and development of the Information Security Model will be analyzed and postulated. Presentation will clearly demonstrate the benefits of proposed attributes based approach and defined risk and security space for modeling and measuring.

  14. Cabin Environment Physics Risk Model

    Science.gov (United States)

    Mattenberger, Christopher J.; Mathias, Donovan Leigh

    2014-01-01

    This paper presents a Cabin Environment Physics Risk (CEPR) model that predicts the time for an initial failure of Environmental Control and Life Support System (ECLSS) functionality to propagate into a hazardous environment and trigger a loss-of-crew (LOC) event. This physics-of failure model allows a probabilistic risk assessment of a crewed spacecraft to account for the cabin environment, which can serve as a buffer to protect the crew during an abort from orbit and ultimately enable a safe return. The results of the CEPR model replace the assumption that failure of the crew critical ECLSS functionality causes LOC instantly, and provide a more accurate representation of the spacecraft's risk posture. The instant-LOC assumption is shown to be excessively conservative and, moreover, can impact the relative risk drivers identified for the spacecraft. This, in turn, could lead the design team to allocate mass for equipment to reduce overly conservative risk estimates in a suboptimal configuration, which inherently increases the overall risk to the crew. For example, available mass could be poorly used to add redundant ECLSS components that have a negligible benefit but appear to make the vehicle safer due to poor assumptions about the propagation time of ECLSS failures.

  15. Completing the Remedial Sequence and College-Level Credit-Bearing Math: Comparing Binary, Cumulative, and Continuation Ratio Logistic Regression Models

    Science.gov (United States)

    Davidson, J. Cody

    2016-01-01

    Mathematics is the most common subject area of remedial need and the majority of remedial math students never pass a college-level credit-bearing math class. The majorities of studies that investigate this phenomenon are conducted at community colleges and use some type of regression model; however, none have used a continuation ratio model. The…

  16. Trade Credit and Informational Asymmetry.

    OpenAIRE

    Smith, Janet Kiholm

    1987-01-01

    Commonly used trade credit terms implicitly define a high interest rate that operates as an efficient screening device where information about buyer default risk is asymmetrically held. By offering trade credit, a seller can identify prospective defaults more quickl y than if financial institutions were the sole providers of short-ter m financing. The information is valuable in cases where a seller has made nonsalvageable investments in buyers since it enables the seller to take actions to pr...

  17. 12 CFR 615.5182 - Interest rate risk management by associations and other Farm Credit System institutions other...

    Science.gov (United States)

    2010-01-01

    ... 12 Banks and Banking 6 2010-01-01 2010-01-01 false Interest rate risk management by associations... OPERATIONS, AND FUNDING OPERATIONS Risk Assessment and Management § 615.5182 Interest rate risk management by... shall comply with the requirements of §§ 615.5180 and 615.5181. The interest rate risk management...

  18. Identification, Analysis, Modeling and Prediction of Time Series Characterizing the Indicators of Asset Structure in the Credit Institutions Operating in Romania

    Directory of Open Access Journals (Sweden)

    Daniel CALINICA

    2012-08-01

    Full Text Available This paper aims to accurately characterize the dynamics of the structural indicators of the assets in the credit institutions operating in Romania through an empirical mathematical model of dual function: regulation and control. The model can be used to predict the future evolution of the economic processes involved, or to study how to act upon them (management in case of changes in the environment around them (e.g. the impact of reducing the minimum compulsory reserve requirements on credit etc.

  19. EOQ Model for Deteriorating Items with exponential time dependent Demand Rate under inflation when Supplier Credit Linked to Order Quantity

    Directory of Open Access Journals (Sweden)

    Rakesh Prakash Tripathi

    2014-05-01

    Full Text Available In paper (2004 Chang studied an inventory model under a situation in which the supplier provides the purchaser with a permissible delay of payments if the purchaser orders a large quantity. Tripathi (2011 also studied an inventory model with time dependent demand rate under which the supplier provides the purchaser with a permissible delay in payments. This paper is motivated by Chang (2004 and Tripathi (2011 paper extending their model for exponential time dependent demand rate. This study develops an inventory model under which the vendor provides the purchaser with a credit period; if the purchaser orders large quantity. In this chapter, demand rate is taken as exponential time dependent. Shortages are not allowed and effect of the inflation rate has been discussed. We establish an inventory model for deteriorating items if the order quantity is greater than or equal to a predetermined quantity. We then obtain optimal solution for finding optimal order quantity, optimal cycle time and optimal total relevant cost. Numerical examples are given for all different cases. Sensitivity of the variation of different parameters on the optimal solution is also discussed. Mathematica 7 software is used for finding numerical examples.

  20. Fuzzy audit risk modeling algorithm

    Directory of Open Access Journals (Sweden)

    Zohreh Hajihaa

    2011-07-01

    Full Text Available Fuzzy logic has created suitable mathematics for making decisions in uncertain environments including professional judgments. One of the situations is to assess auditee risks. During recent years, risk based audit (RBA has been regarded as one of the main tools to fight against fraud. The main issue in RBA is to determine the overall audit risk an auditor accepts, which impact the efficiency of an audit. The primary objective of this research is to redesign the audit risk model (ARM proposed by auditing standards. The proposed model of this paper uses fuzzy inference systems (FIS based on the judgments of audit experts. The implementation of proposed fuzzy technique uses triangular fuzzy numbers to express the inputs and Mamdani method along with center of gravity are incorporated for defuzzification. The proposed model uses three FISs for audit, inherent and control risks, and there are five levels of linguistic variables for outputs. FISs include 25, 25 and 81 rules of if-then respectively and officials of Iranian audit experts confirm all the rules.

  1. Credit Management System

    Data.gov (United States)

    US Agency for International Development — Credit Management System. Outsourced Internet-based application. CMS stores and processes data related to USAID credit programs. The system provides information...

  2. 12 CFR 614.4590 - Equitable treatment of OFIs and Farm Credit System associations.

    Science.gov (United States)

    2010-01-01

    ... differences in credit risk and administrative costs to the Farm Credit Bank or agricultural credit bank. (c... 12 Banks and Banking 6 2010-01-01 2010-01-01 false Equitable treatment of OFIs and Farm Credit System associations. 614.4590 Section 614.4590 Banks and Banking FARM CREDIT ADMINISTRATION FARM CREDIT...

  3. Dynamic Factor Models With Macro, Frailty and Industry Effects for U.S. Default Counts: The Credit Crisis of 2008

    NARCIS (Netherlands)

    Koopman, S.J.; Lucas, A.; Schwaab, B.

    2012-01-01

    We develop a high-dimensional, nonlinear, and non-Gaussian dynamic factor model for the decomposition of systematic default risk conditions into latent components for (1) macroeconomic/financial risk, (2) autonomous default dynamics (frailty), and (3) industry-specific effects. We analyze discrete

  4. EOQ Model for Delayed Deteriorating Items with Shortages and Trade Credit Policy

    Directory of Open Access Journals (Sweden)

    R Sundararajan

    2015-08-01

    Full Text Available This paper deals with a deterministic inventory model for deteriorating items under the condition of permissible delay in payments with constant demand rate is a function of time which differs from before and after deterioration for a single item. Shortages are allowed and completely backlogged which is a function of time. Under these assumptions, this paper develops a retailer's model for obtaining an optimal cycle length and ordering quantity in deteriorating items of an inventory model. Thus, our objective is retailer's cost minimization problem to nd an optimal replenishment policy under various parameters. The convexity of the objective function is derived and the numerical examples are provided to support the proposed model. Sensitivity analysis of the optimal solution with respect to major parameters of the model is included and the implications are discussed.

  5. The African Credit Trap

    OpenAIRE

    Svetlana Andrianova; Badi H. Baltagi; Panicos O. Demetriades; David Fielding

    2010-01-01

    We put forward a plausible explanation of African financial underdevelopment in the form of a bad credit market equilibrium. Utilising an appropriately modified IO model of banking, we show that the root of the problem could be unchecked moral hazard (strategic loan defaults) or adverse selection (a lack of good projects). We provide empirical evidence from a large panel of African banks which suggests that loan defaults are a major factor inhibiting bank lending when the quality of regulatio...

  6. 76 FR 16235 - Corporate Credit Unions, Technical Corrections

    Science.gov (United States)

    2011-03-23

    ... inadvertently included particular investments that did not--when subject to the other credit risk and asset... NATIONAL CREDIT UNION ADMINISTRATION 12 CFR Part 707 RIN 3133-AD58 Corporate Credit Unions, Technical Corrections AGENCY: National Credit Union Administration (NCUA). ACTION: Final rule. SUMMARY: In...

  7. MODEL PENSKORAN PARTIAL CREDIT PADA BUTIR MULTIPLE TRUE-FALSE BIDANG FISIKA

    OpenAIRE

    Wasis Wasis

    2013-01-01

    Tujuan penelitian ini menghasilkan model penskoran politomus untuk respons butir multiple true-false, sehingga dapat mengestimasi secara lebih akurat kemampuan di bidang fisika. Pengembangan penskoran menggunakan Four-D model dan diuji akurasinya melalui penelitian empiris dan simulasi. Penelitian empiris menggunakan 15 butir multiple true-false yang diambil dari soal UMPTN tahun 1996-2006 dan dikenakan pada 410 mahasiswa baru FMIPA Universitas Negeri Surabaya angkatan tahun 2007. Respons pes...

  8. Model of MSD Risk Assessment at Workplace

    OpenAIRE

    K. Sekulová; M. Šimon

    2015-01-01

    This article focuses on upper-extremity musculoskeletal disorders risk assessment model at workplace. In this model are used risk factors that are responsible for musculoskeletal system damage. Based on statistic calculations the model is able to define what risk of MSD threatens workers who are under risk factors. The model is also able to say how MSD risk would decrease if these risk factors are eliminated.

  9. Delivery Terms in Transport Process of Export Trade and their Effect on the Risk of Discrepancy in Documentary Letters of Credit; Evidence from Estonia

    Directory of Open Access Journals (Sweden)

    Hamed Alavi

    2018-05-01

    Full Text Available Documentary letters of credit (DLCs are method of payment developed to facilitate the process of international trade by replacing the payment risk of importer with irrevocable payment guarantee of a bank to exporter. Instead, the exporter is supposed to present fully compliant set of documents required by the credit. Documentary nature of DLCs make them vulnerable to the risk of discrepancy. This risk is will affect exporter’s business as he is the one who should absorb it. Therefore, it will be recommended to exporters to negotiate the minimum number of required documents while closing the underlying contract of sales with importer. Since different delivery terms (INCOTERMS require presentation of different documents, this paper studies the correlation between using different terms of delivery with existence of discrepancy in export DLCs in Estonia. For this purpose, author takes empirical approach to answer following research questions: what is the relation between documentary discrepancy and choice of delivery terms and third party documents? and what is the correlation between above mentioned factors and documentary discrepancy in process of DLC operation in Estonian export landscape? The paper is divided into four parts: after the introductory section, the literature review will briefly analyses process of international DLC operation and latest version of INCOTERMS plus their role as delivery terms in international trade. Next section will discuss methodology and results of empirical study done on choice of delivery terms and third party produced documents on discrepancy rate in DLC operation in Estonian export trade. Last but not the least, final section will provide conclusions of the study.

  10. Anglo-American Credit Scoring and Consumer Debt in the Subprime Mortgage Crisis of 2007 as Models for Other Countries?

    Directory of Open Access Journals (Sweden)

    Thomas Fay Ruddy

    2010-08-01

    Full Text Available The system of credit scoring has been built up in recent times on the basis of a compromise struck between individuality and surveillance in ways that boosted consumption through consumer debt. This paper considers the role of credit scoring in the recent financial crisis, concluding that even if credit scoring had worked as intended under its own terms, the practice would not have been enough to limit the defaulting of mortgage borrowers under conditions of falling house prices. The broader economic problem is the crippling amount of consumer debt involved; hence the paper places credit scoring in the larger explanatory framework of consumer debt and, more generally, consumerism in its more problematic form. The sorting accomplished by credit scoring is open to abuses in the marketplace, unless it is tempered by the application of guardrails by a regulatory authority. As cultures beyond the Anglo-American sphere adopt this practice, guardrails like those applied to credit scoring in America are needed; as even the current U.S. Administration has acknowledged, the existing guardrails will have to be complemented by stricter social standards. The paper provides a derivation of the theoretical background on credit scoring as surveillance, and includes a literature survey.

  11. 76 FR 10492 - Credit Reforms in Organized Wholesale Electric Markets

    Science.gov (United States)

    2011-02-25

    ..., Order No. 741, to amend its regulations to improve the management of risk and use of credit in the... discriminatory or preferential. The management of risk and credit requires a balance between protecting the... are less of a credit risk because their bond resolutions give explicit payment [[Page 10494

  12. Adopting Zero Interest Financing Model (ZIFM in Islamic Microfinance Institutions: The Case of Shariah People Credit Bank (BPRS, Indonesia

    Directory of Open Access Journals (Sweden)

    Mohd Thas Thaker Mohamed Asmy Bin

    2016-01-01

    Full Text Available Microfinance has emerged as an important instrument to alleviate poverty in many countries including in developing countries. Despite being able to demonstrate successes in the activity, conventional microfinance is not without controversy. The findings from the existing studies revealed that conventional microfinance is less effective, fail to reach the poorest people and generally have a limited effect on income. In addition, conventional microfinance also has highly criticized for charging excessive interest rates and fees to the poor entrepreneur. In some Muslim countries, conventional microfinance has always been rejected, due to its non-compliance with the Islamic principles, particularly on the issue related to interest or riba. Islamic microfinance evolved and reckoned as an alternative to its counterpart. However, the outreach of Islamic microfinance is very limited where only there is very few Islamic microfinance institutions and Islamic banks involved in microfinance activity. Also, Islamic microfinance is having an issue of convergence of activity with the conventional practices. Thus, this paper aims to propose to adopt Zero Interest Financing Model (ZIFM for Islamic microfinance institutions. This study focuses on the case of Indonesian Islamic microfinance institution namely Shariah People Credit Bank (BPRS by observing their experience and some emerging issues. The proposed model is expected to address an emerging issue in Islamic microfinance institutions.

  13. A structural model for the housing and credit markets in Italy

    OpenAIRE

    Andrea Nobili; Francesco Zollino

    2012-01-01

    We estimate a fully-fledged structural system for the housing market in Italy, taking into account the multi-fold link with bank lending to both households and construction firms. The model allows the house supply to vary in the short run and the banking sector to affect the equilibrium in the housing market, through its effect on housing supply and demand. We show that house prices react mostly to standard drivers such as disposable income, expected inflation and demographic pressures. Lendi...

  14. Credit: A Teaching Unit.

    Science.gov (United States)

    Clanton, Brandolyn; And Others

    Intended for teachers of secondary school students, five lessons on consumer credit are presented. In the first lesson students identify and evaluate sources of credit, compare some of the costs and benefits of credit, and learn to apply criteria used in evaluating applications for credit. In the second lesson, students learn about two basic types…

  15. Refundable Tax Credits

    OpenAIRE

    Congressional Budget Office

    2013-01-01

    In 1975, the first refundable tax credit—the earned income tax credit (EITC)—took effect. Since then, the number and cost of refundable tax credits—credits that can result in net payments from the government—have grown considerably. Those credits will cost $149 billion in 2013, CBO estimates, mostly for the EITC and the child tax credit.

  16. NCA & Credit Guarantees

    African Journals Online (AJOL)

    stooppn

    purposes of the National Credit Act; what the definition of a credit guarantee set out ...... Scholtz et al National Credit Act in para 8.2.4; Scott et al Law of Commerce ..... Eitelberg E "Autonomy of Documentary Credit Undertakings in South African.

  17. Credit card spending limit and personal finance: system dynamics approach

    Directory of Open Access Journals (Sweden)

    Mirjana Pejić Bach

    2014-03-01

    Full Text Available Credit cards have become one of the major ways for conducting cashless transactions. However, they have a long term impact on the well being of their owner through the debt generated by credit card usage. Credit card issuers approve high credit limits to credit card owners, thereby influencing their credit burden. A system dynamics model has been used to model behavior of a credit card owner in different scenarios according to the size of a credit limit. Experiments with the model demonstrated that a higher credit limit approved on the credit card decreases the budget available for spending in the long run. This is a contribution toward the evaluation of action for credit limit control based on their consequences.

  18. Quantile uncertainty and value-at-risk model risk.

    Science.gov (United States)

    Alexander, Carol; Sarabia, José María

    2012-08-01

    This article develops a methodology for quantifying model risk in quantile risk estimates. The application of quantile estimates to risk assessment has become common practice in many disciplines, including hydrology, climate change, statistical process control, insurance and actuarial science, and the uncertainty surrounding these estimates has long been recognized. Our work is particularly important in finance, where quantile estimates (called Value-at-Risk) have been the cornerstone of banking risk management since the mid 1980s. A recent amendment to the Basel II Accord recommends additional market risk capital to cover all sources of "model risk" in the estimation of these quantiles. We provide a novel and elegant framework whereby quantile estimates are adjusted for model risk, relative to a benchmark which represents the state of knowledge of the authority that is responsible for model risk. A simulation experiment in which the degree of model risk is controlled illustrates how to quantify Value-at-Risk model risk and compute the required regulatory capital add-on for banks. An empirical example based on real data shows how the methodology can be put into practice, using only two time series (daily Value-at-Risk and daily profit and loss) from a large bank. We conclude with a discussion of potential applications to nonfinancial risks. © 2012 Society for Risk Analysis.

  19. Spatiotemporal Modeling of Community Risk

    Science.gov (United States)

    2016-03-01

    Ertugay, and Sebnem Duzgun, “Exploratory and Inferential Methods for Spatio-Temporal Analysis of Residential Fire Clustering in Urban Areas,” Fire ...response in communities.”26 In “Exploratory and Inferential Methods for Spatio-temporal Analysis of Residential Fire Clustering in Urban Areas,” Ceyhan...of fire resources spread across the community. Spatiotemporal modeling shows that actualized risk is dynamic and relatively patterned. Though

  20. Factors Affecting the Behavior of University Community to Use Credit Card

    Directory of Open Access Journals (Sweden)

    Maya Sari

    2011-12-01

    Full Text Available This study was aimed to gain insights and tested the factors that influence credit cards usage in university community of UPI through Theory of Planned Behavior model approach. Using Path Analysis to explain the direct and indirect influence of attitude, subjective norm and behavioral control to intention and behavior of credit card usage. The results showed all respondents have a positive attitude towards credit cards usage, with high influence of subjective norm, high behavior control, high intention to use credit cards and all respondents used credit cards wisely. There was positive and significant effect either simultaneously or partially between behavioral attitudes, subjective norms, and behavior control toward the intention to use credit card. The partial test results showed behavioral attitude has the greatest influence on the intention to use credit card. There was a positive and significant influence both simultaneously and partially between behavioral attitudes, subjective norms, and behavioral control on default-risk debt behavior. The partial results showed that attitude gives the greatest influence on default debt risk behavior. The result also proved there was a positive and significant influence of the intention to use credit card on default debt risk behavior.