Credit Risk Research Papers - Academia.edu (original) (raw)

The purpose of this research is to compare the four indicators of earnings quality that use only accounting data in order to determine the quality of profit and determine their impact on the degree of credit risk of listed companies in... more

The purpose of this research is to compare the four indicators of earnings quality that use only accounting data in order to determine the quality of profit and determine their impact on the degree of credit risk of listed companies in Tehran Stock Exchange. In so doing, the data related to 156 companies were gathered between 2008 and 2017. In keeping with, 20 financial indicators were used to determine the risk of credit and then their ranking by data envelopment analysis method. The significant relationship between the indices with the credit rating of each company was also tested. Likewise, four indicators of earnings quality including sustainability and predictability features, profit / cash relationship, accruals, and, finally, earnings response coefficient and adjusted earnings response coefficient were used. First, the relationship of the 20 financial ratios applied with the credit rating determined by the data envelopment analysis method was verified in the form of a regression model tested and validated by the model. Then, the significant relationship between the four indicators of earnings quality with the credit rating of each company was tested. The results showed that companies with lower credit risk enjoyed higher earnings quality. Likewise, with a decrease in the quality of profit indicators, their credit risk will also increase. Based on the findings in the research, it can be concluded that there is a significant relationship between credit risk of listed companies in Tehran Stock Exchange and their main indicators of earnings quality. In this research, credit rating is the amount of credit risk calculated and ranked by data envelopment analysis method.

To the public, all banks seem alike. But banking insiders make important distinctions between community banks and all other banks. Policymakers worry that community banks’ unique characteristics threaten their survival in the face of... more

To the public, all banks seem alike. But banking insiders make important distinctions between community banks and all other banks. Policymakers worry that community banks’ unique characteristics threaten their survival in the face of industry consolidation. However, despite dramatic regulatory and technological changes in the industry in the past two decades, community banks have not only survived but often prospered.

The goal of this paper is to analyze the role that non-financial variables can play in assessing Smes creditworthiness and to compare their value in predicting business failure with the one of the most commonly used financial ratios. We... more

The goal of this paper is to analyze the role that non-financial variables can play in assessing Smes creditworthiness and to compare their value in predicting business failure with the one of the most commonly used financial ratios. We investigate the importance for banks in modeling credit risk for Smes using non-financial variables able to describe the relationship company-banks. Our findings demonstrate that credit relationship information is better predictor of corporate failure than financial ratios. We also test the models on an out-of-time and out-of-universe sample to prove their accuracy and soundness. Our initial assumptions remained confirmed: non-financial variables allow to improve the accuracy and performance of banks’ credit rating models.

A commodity exchange is a goods and financial market where different groups of participants trade commodities and commodity-linked contracts, with the underlying objective of transferring exposure to commodity price risks (UNCTAD). A... more

A commodity exchange is a goods and financial market where different groups of participants trade commodities and commodity-linked contracts, with the underlying objective of transferring exposure to commodity price risks (UNCTAD). A commodity exchange that only trades goods is known as a physical or 'cash or forward' market, while the exchange that trades price derivatives is known as financial or 'futures and options' market (see Glossary for detailed definitions). Some agriculture commodity exchanges have both. Agricultural commodity exchanges date as far back as the early 18th century. Modern exchanges, notably the Chicago Board of Trade (CBOT) was created in 1848, recently merged with the Chicago Mercantile Exchange (CME), is one the oldest and most successful futures exchanges worldwide. Today several agricultural commodity exchanges exist throughout the Latin America and Caribbean (LAC) region. They facilitate trade and financial products in countries whose ec...

Risks of payment system of banking institutions of Ukraine are considered in this study. Risk events clearly correlate to the effectiveness of network interaction of banking institutions to adapt information technology of payment systems... more

Risks of payment system of banking institutions of Ukraine are considered in this study. Risk events clearly correlate to the effectiveness of network interaction of banking institutions to adapt information technology of payment systems in the payment portfolio of banks when changing operating environment, so mechanism for minimizing their probability has been developed. Economic elements of the mechanism of minimizing the risks of payment systems are identified, which allow forming the planned level of profitability, risk and liquidity of institutions (organizations) within the relevant principles, methods, levers, cash flows in order to respond and adapt to changes in the environment. A methodical approach to assessing the effectiveness of risk management of payment systems of banking institutions, which is from the standpoint of multivariate structuring and a list of their indicators of the microeconomic level, forms an optimal set of tools to minimize the set of risks. Indicators of payment systems of Ukraine are determined, according to the net level of credit risk, liquidity risk, business risk, investment risk, legal risk, operational risk, systemic risk, technological and information security risk. The impulse index of functioning of payment systems of Ukraine is calculated. A neuro-fuzzy model for assessing the individual credit risk of participants – legal entities (users-borrowers) of card payment scoring of a banking institution is developed. The basic criteria for assessing the individual credit risk of a participant-legal entity (user-borrower) by card payment scoring are determined.

The paper examined post merger performance of Nigerian banking sector with the aim of determining the effect and the extent to which merger influenced bank performance. A judgmental sample technique was used to select 15 listed commercial... more

The paper examined post merger performance of Nigerian banking sector with the aim of determining the effect and the extent to which merger influenced bank performance. A judgmental sample technique was used to select 15 listed commercial banks in Nigeria. Data were collected from the published annual reports and account of these banks and were analyzed using percentage and ratios. Multiple regressions were used in testing the hypotheses. The study revealed that there is a strong relationship between bank performance and merger (strategic decisions) – asset profile, capital structure, operating efficiency, liquidity risk and credit risk. That strategic decision has positively influenced bank performance. That on average, bank consolidation resulted into improved performance. The study therefore recommended that the management of the banks should embrace diversification and financial innovation on product strategies as this will help in generating more income for the banks. They should also try to use merger as a strategic tool which must be continuously applied and implemented.

The main purpose of this paper is to study the problem created by the lack of information about the credit history of some debtors in the databases used to develop credit scoring models and the use of information about behavior compiled... more

The main purpose of this paper is to study the problem created by the lack of information about the credit history of some debtors in the databases used to develop credit scoring models and the use of information about behavior compiled by a credit risk register as a potential solution to the problem. The paper analyzes two problems: (i) the need to provide a credit risk estimation of debtors whose behavior is unknown (because they are deleted from the databases without indication of the reason), and (ii) the assessment of the impact of ignoring these data when evaluating the credit risk of entities’ portfolios. The fundamental strategy will be to allow the use of debtors’ credit history in other entities, recorded in the credit risk register.

he Agricultural Bank of Egypt (ABE) has the right to perform all credit portfolio of the commercial banks. In this context, the ABE faces a problem in making a balance between practicing regular activities that achieve high returns and... more

he Agricultural Bank of Egypt (ABE) has the right to perform all credit portfolio of the commercial banks. In this context, the ABE faces a problem in making a balance between practicing regular activities that achieve high returns and those with high costs from one side, and providing farmers with their needs of agricultural loans, as well. Therefore, the current research attempts to answer a question on how well the ABE can succeed in achieving these goals without affecting the size of loans provided to the agricultural sector as productive and investment loans. Hence, this research aimed at analyzing credit decisions made by the ABE in terms of the distribution of credit portfolio of agricultural loans, including productive and investment loans and predicting the size of these loans based on market mechanisms, as well. In order to achieve this objective, the research used the Markov series analysis for the period (

The collapse of the global financial industry in 2008 and the subsequent decay of most Western economies into a period of prolonged economic stagnation have represented a springboard for the progressive growth of alternative channels of... more

The collapse of the global financial industry in 2008 and the subsequent decay of most Western economies into a period of prolonged economic stagnation have represented a springboard for the progressive growth of alternative channels of financial intermediation. The reluctance and inability of mainstream banks in the post-crisis years to provide credit facilities to the real economy, most critically to start-ups and small and medium-sized enterprises, propelled the latest wave of financial innovation, this time under the guise of FinTech. Much has been written on the rise of FinTech in recent years, but there is still insufficient clarity about the benefits that this phenomenon is bringing to the real economy and the potential risks that can arise from its growth. This paper maps the development of FinTech lending platforms in the UK and reconceptualises the rationale for their growth. In doing that, this study focuses on the structure and operation of the main UK platforms, recognising that while some are effectively banks that adopt a technology-based business model, many platforms operate under the P2P business model. The question then is to assess the policy and regulatory approach that is relevant to UK P2P platforms. Interestingly, the emergence of P2P securitisation raises a number of regulatory and policy questions, because longer intermediation chains typical of securitisation may well defy the social and economic purposes under which the idea of P2P developed. Furthermore, questions of systemic risk inevitably resurface in these types of transactions. Ensuing problems related to the best way to regulate these new channels of financial intermediation lead to critically evaluate the initiatives launched by the UK FCA, initially under the Innovation Hub, and more recently under the consultation for a new regulatory framework. Keywords P2P lending · FinTech · Financial intermediation · Market-based finance · P2P securitisation · Financial conduct authority · Credit risk · Systemic risk Only in the financial world is there such an efficient design for concealing what, with the passage of time, will be revealed as self-and general delusion

Default probabilities (PDs) and correlations play a crucial role in the New Basel Capital Accord. In commercial credit risk models they are an important constituent. Yet, modeling and estimation of PDs and correlations is still under... more

Default probabilities (PDs) and correlations play a crucial role in the New Basel Capital Accord. In commercial credit risk models they are an important constituent. Yet, modeling and estimation of PDs and correlations is still under active discussion. We show how the Basel II one factor model which is used to calibrate risk weights can be extended to a model for estimating PDs and correlations. The important advantage of this model is that it uses actual information about the point in time of the credit cycle. Thus, uncertainties about the parameters which are needed for Value-at-Risk calculations in portfolio models may be substantially reduced. First empirical evidence for the appropriateness of the models and underlying risk factors is given with S&P data.

A supply of dwellings greater than the demand, a reduction in the availability of housing loans and increased credit risk, caused, inter alia, by the financial crisis: these are the basic features of today's residential property and... more

A supply of dwellings greater than the demand, a reduction in the availability of housing loans and increased credit risk, caused, inter alia, by the financial crisis: these are the basic features of today's residential property and commercial premises markets in Croatia today. Built but unsold housing units have exposed private investors, who have organised the supply of units within the balance sheet of their firms, to significant risk of underinvestment. The materialisation of this risk is most manifested in the impossibility of funding the core business because of loans that they have agreed on for the construction of dwelling units meant for sale on the market. The paper then proposes a model that, if it were applied, could insure investors to a greater extent against the risk of underinvestment. The supply of dwelling units with protected rentals by the local public sector organised in the traditional manner, i.e. according to a model in which the local public sector figur...

Credit risk analysis is an important topic in the financial risk management. Due to recent financial crises and regulatory concern of Basel II, credit risk analysis has been the major focus of financial and banking industry. An accurate... more

Credit risk analysis is an important topic in the financial risk management. Due to recent financial crises and regulatory concern of Basel II, credit risk analysis has been the major focus of financial and banking industry. An accurate estimation of credit risk could be transformed into a more efficient use of economic capital. In this study, we try to use a triple-phase neural network ensemble technique to design a credit risk evaluation system to discriminate good creditors from bad ones. In this model, many diverse neural network models are first created. Then an uncorrelation maximization algorithm is used to select the appropriate ensemble members. Finally, a reliability-based method is used for neural network ensemble. For further illustration, a publicly credit dataset is used to test the effectiveness of the proposed neural ensemble model.

En étudiant les controverses relatives aux mécanismes légitimes de régulation des faillites souveraines, cette enquête montre la capacité de résilience des instruments et des acteurs assurant la continuité d’un ordre marchand dans les... more

En étudiant les controverses relatives aux mécanismes légitimes de régulation des faillites souveraines, cette enquête montre la capacité de résilience des instruments et des acteurs assurant la continuité d’un ordre marchand dans les domaines juridiques et financiers à l’échelle globale. À deux reprises, en 2002 à travers une initiative du Fonds monétaire international, puis en 2015 à l’Assemblée générale des Nations unies, les alternatives à la régulation par les marchés de capitaux, visant à installer un mécanisme juridique supranational, ont été disqualifiées. En s’appuyant sur une enquête auprès des acteurs et des institutions constitutives de la gouvernance économique internationale, l’article donne à voir le travail de consolidation de l’ordre marchand, et ce à quoi tient cet ordre global. Contrairement à une vision spontanée, les États ne sont pas exclusivement des « victimes » des marchés globalisés de la dette et des fonds « vautours » qui refusent les renégociations de dette et entament des procédures pour se faire rembourser intégralement. Au nom de leur attractivité financière et de leur accès aux ressources des marchés de capitaux globalisés, les départements du Trésor de différents États émergents se soumettent aux formats contractuels des places financières étrangères et concèdent une version restreinte de leurs pouvoirs souverains.

This article provides a new methodology for pricing and hedging derivative securities involving credit risk. Two types of credit risks are considered. The first is where the asset underlying the derivative security may default. The second... more

This article provides a new methodology for pricing and hedging derivative securities involving credit risk. Two types of credit risks are considered. The first is where the asset underlying the derivative security may default. The second is where the writer of the derivative security may default. The authors apply the foreign currency analogy of R. Jarrow and S. Turnbull (1991)