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

This study investigates empirically the effects that hedge funds can have on the stability of the financial system. We conclude that hedge funds are in general less risky than banks. We do not find much evidence for the fear that hedge... more

This study investigates empirically the effects that hedge funds can have on the stability of the financial system. We conclude that hedge funds are in general less risky than banks. We do not find much evidence for the fear that hedge fund failures can trigger a systemic crisis in the banking sector. The main risk resides in hedge fund failures that may bring down a bank and thereby indirectly also endanger the stability of other banks and the payment system. If the hedge fund industry is to be regulated further, it should be for this reason.

The primary objective of this study is to assess the performance of Saudi banks over a specified period, which is from 2015 to 2021. The chosen methodology for this analysis is panel data regression. Panel data combines cross-sectional... more

The primary objective of this study is to assess the performance of Saudi banks over a specified period, which is from 2015 to 2021. The chosen methodology for this analysis is panel data regression. Panel data combines cross-sectional and time-series data, making it suitable for examining trends and relationships over time among different entities (in this case, banks). The study uses annual financial data for the 10 selected banks over the seven-year period, from 2015 to 2021.
The study finds a marginally negative association between COVID-19 and the performance indicators ROA and ROE. This suggests that the COVID-19 pandemic had a slightly adverse impact on the profitability and equity returns of the Saudi banks included in the analysis. The study employs a dummy variable, likely called "COVID," to account for the impact of the COVID-19 pandemic. The results indicate that there is a statistically significant but weakly negative association between return on equity (ROE) and credit risk (CR). The study finds that credit risk and liquidity risk are both insignificant when analyzing return on assets (ROA). These findings provide valuable insights into how external factors like a pandemic and internal factors like credit risk can affect the financial performance of banks. The study's results offer regulatory authorities in Saudi Arabia a valuable resource for making informed decisions regarding the financial performance and stability of the banking sector during a crisis. By incorporating these findings into their policies and oversight activities, regulatory bodies can contribute to a healthier and more robust banking system that benefits both the financial institutions and the broader economy.

Credit risk modeling is essential for financial institutions to assess lending risks. Traditionally based on statistical methods, credit risk modeling has been revolutionized by Artificial Intelligence (AI) and Machine Learning (ML). This... more

Credit risk modeling is essential for financial institutions to assess lending risks. Traditionally based on statistical methods, credit risk modeling has been revolutionized by Artificial Intelligence (AI) and Machine Learning (ML). This paper explores these advancements, highlighting how AI and ML improve accuracy, efficiency, and robustness. It covers traditional and AIdriven techniques, applications in credit scoring, default prediction, fraud detection, and stress testing, and addresses challenges related to data quality, interpretability, and regulatory compliance. Future trends such as explainable AI, alternative data, real-time monitoring, and quantum computing are also discussed, emphasizing the need for financial institutions to adopt these technologies for a more resilient financial ecosystem.

Small and Medium-sized Enterprises (SMEs) represent the most efficient segment of the economy in almost all countries of the world. These companies usually face limited access to the favorable sources of financing in both the money market... more

Small and Medium-sized Enterprises (SMEs) represent the most efficient segment of the economy in almost all countries of the world. These companies usually face limited access to the favorable sources of financing in both the money market and the capital market, especially in terms of the conditions and price of their use. It is precisely the difficult financing that is the biggest obstacle to the growth and development of SMEs. As SMEs usually have no access to organized capital markets, bank financing often remains the only alternative. Banks’ biggest problems when granting loans to SMEs are related to MEASURING THE RISK OF LENDING TO SMALL AND MEDIUM-SIZED ENTERPRISES IN THE REPUBLIC OF SERBIA IN LIGHT OF MODERN BANKING REGULATIONS

China's Social Credit System (SCS) is widely regarded as a groundbreaking form of datadriven governance in media reports. The term "social credit system" as used in academic discourses also denotes a comprehensive networked system of... more

China's Social Credit System (SCS) is widely regarded as a groundbreaking form of datadriven governance in media reports. The term "social credit system" as used in academic discourses also denotes a comprehensive networked system of behaviour evaluation and responsibility determination. The SCS in practice, however, is still taking shape, with official documents interpreting the concept of "social credit" differently and associating the system with changing policy goals. This essay seeks to provide a pathfinder in the labyrinth of China's policies and pilot programmes concerning the social credits of individuals, outlining three primary functions served by the SCS during its evolution. The analysis here does not intend to be exhaustive nor technology-centric. It focuses on the legal nature of the essential measures of assessment and punishment within the obscure boundary of the system. The purpose is to capture better the challenges posed by the SCS to individuals' rights and the limits of legal redress under China's changing politico-legal landscape.

onventionally banks and other financial institutions have offered credit facilities to their clients based on eir own judgment and on limited knowledge of the clients and have had to rely on the traditional marketing avenues for the loans... more

onventionally banks and other financial institutions have offered credit facilities to their clients based on eir own judgment and on limited knowledge of the clients and have had to rely on the traditional marketing avenues for the loans notably reduced interest rates, accessibility, advertising and referrals offeredby existing customers and staff. The introduction of Credit Information Sharing and Referencing hasrevolutionized the credit market and the players are faced with the uphill task of not only enforcing thispractice, but also to educate their clientele on its existence, usage and implications and still attract existingand new borrowers. This study assesses the impact of Credit Information Sharing on the Marketing techniques used by the lendinginstitutions as well as identify new methods or approaches both planned or spontaneous, while at the same time assessing the impact of the new practice on borrowing patterns in the local economy and the extent to which Credit Informa...

Credit risk plays a key role in financial modeling, and financial institutions are required to incorporate it in their pricing, as well as in capital requirement calculations. A common manner to extract credit worthiness information for... more

Credit risk plays a key role in financial modeling, and financial institutions are required to incorporate it in their pricing, as well as in capital requirement calculations. A common manner to extract credit worthiness information for existing and potential counterparties is based on the Credit Default Swap (CDS) market. Nonetheless, not all counterparties of a financial institution have (liquid) CDSs traded in the market. In this case, financial institutions shall employ a proxy methodology to estimate the default probabilities of these counterparties. Starting from the intersection methodology for credit curves, in this article we investigate whether it is possible to construct proxy credit curves from CDS quotes by means of (weighted) Wasserstein barycenters. We show how, under simple and common assumptions, this revised methodology leads to elementary and intuitive formulae to calculate distances between CDS-implied default probability distributions. Further, we illustrate how...

This paper seeks to determine whether there is any relationship between oil price shocks and the stock returns of South African firms. Oil prices rise, and the price tend to be volatile. The volatility of oil price has drawn the attention... more

This paper seeks to determine whether there is any relationship between oil price shocks and the stock returns of South African firms. Oil prices rise, and the price tend to be volatile. The volatility of oil price has drawn the attention of many researchers to study the impact of oil supply and demand shocks on various economies. In this study shocks are split into three, namely crude oil supply shocks; shocks to the global demand for all industrial commodities; and global crude oil market demand specific, as opposed to a single oil price shock. This paper uses the vector autoregressive (VAR) model and the Vector Error Correction (VEC) models to quantify the effect of oil price shocks on South Africa’s stock returns.

Non-performing loans (NPLs) present one of the most controversial issues in both developed and developing countries. The main purpose of this paper is to analyze and compare the loan portfolio and NPLs in the Western Balkan countries:... more

Non-performing loans (NPLs) present one of the most controversial issues in both developed and developing countries. The main purpose of this paper is to analyze and compare the loan portfolio and NPLs in the Western Balkan countries: Albania, Bosnia and Herzegovina, Kosovo, Macedonia, Montenegro, and Serbia for the period 2008-2015. Besides, this research aims to make a comparative analysis of some other macroeconomic indicators and industry factors that affect them such as GDP, banking sector assets, loan portfolio, asset participation in GDP, credit participation in GDP, deposit credit ratio, the NPL report on total loans. The results show that the NPL have had a growing trend in the post-global financial crisis, with different variations. In this regard, the highest rate of NPL reflects Serbia, Albania, followed by Montenegro, B&H, and Macedonia, while the lowest rate is in Kosovo.

Dans le secteur financier dynamique, les banques cherchent activement à cultiver la fidélité de leurs clients pour garantir une création de valeur durable. Cette démarche nécessite une harmonisation précise entre la rétention client et... more

Dans le secteur financier dynamique, les banques cherchent activement à cultiver la fidélité de leurs clients pour garantir une création de valeur durable. Cette démarche nécessite une harmonisation précise entre la rétention client et une gestion proactive des risques, une responsabilité omniprésente à toutes les étapes de la gestion bancaire. La gestion des risques guide la stratégie opérationnelle, surveillant continuellement les processus pour détecter et rectifier les erreurs tout en assurant la conformité aux normes financières post-opérationnelles. Cette approche intégrée permet aux banques non seulement de maintenir la satisfaction client, mais aussi de renforcer leur résilience face aux fluctuations du marché financier. Pour analyser plus en profondeur l'impact spécifique du risque opérationnel sur la satisfaction des clients, nous avons adopté une méthodologie rigoureuse. Nous avons d'abord utilisé la simulation Monte Carlo pour générer 341 scénarios potentiels, suivie d'une analyse détaillée des résultats à travers une régression logistique ajustée selon le modèle de Firth. Cette approche statistique avancée a clairement démontré que le risque opérationnel exerce une influence significative sur la satisfaction des clients. Les conclusions soulignent l'impératif pour les banques de gérer efficacement les risques opérationnels afin de maintenir la confiance et la fidélité de leur clientèle, essentielles à leur performance à long terme dans un environnement financier complexe et incertain. Cette capacité à anticiper et à atténuer les risques opérationnels contribue ainsi à renforcer la position des banques sur le marché et à soutenir leur croissance durable dans un contexte économique en constante évolution.

The subject of the paper is assessment of the credit risk of small and medium-sized enterprises (SMEs) in the conditions of the COVID-19 crisis. The paper gives the overview of the theoretical and professional literature on the existing... more

The subject of the paper is assessment of the credit risk of small and medium-sized enterprises (SMEs) in the conditions of the COVID-19 crisis. The paper gives the overview of the theoretical and professional literature on the existing accounting standards related to the assessment of expected loss and banking regulations in terms of capital adequacy, as well as their applicability in the current crisis. Bearing in mind the share of SMEs in total gross domestic product and employment in emerging and developing markets, and dependence of these companies on bank funding, special attention is paid to the researches dealing with the impact of stress tests and an increase in capital requirements on credit supply. Since the paper was written at a time when the COVID-19 crisis was well under way, and the final effects could not be fully analysed, except for only certain projections, future researches will focus on the effectiveness of the existing credit risk assessment models in crisis c...

This paper aims to study the impact of endogenous and exogenous factors on the default probability through the structural approach (Internal Ratings-Based IRB). The study is conducted using data from listed companies on the Stock Exchange... more

This paper aims to study the impact of endogenous and exogenous factors on the default probability through the structural approach (Internal Ratings-Based IRB). The study is conducted using data from listed companies on the Stock Exchange of Casablanca (BVMC); it covers the period from the beginning to the end of 2017. In this paper, we propose a numerical method, based on Monte Carlo simulation, to estimate the default probabilities using the Black & Scholes (1973) model. Our focus was on determining the most influential factors among the internal or external ones that impact the default probability of the listed non-financial companies on BVMC. JEL classification numbers: D81Keywords: Default probability, credit risk, IRB approach, Monte Carlo simulation.

This paper investigates the presence of gregarious behavior of investors for the European emerging stock markets: Romania, Bulgaria and Croatia at industry level using an adjusted CSSD method, in order to correct the multicollinearity and... more

This paper investigates the presence of gregarious behavior of investors for the European emerging stock markets: Romania, Bulgaria and Croatia at industry level using an adjusted CSSD method, in order to correct the multicollinearity and to improve the power of the model. The herding behavior is associated with the market participants’ tendency to mimicry the strategies of others investors, thus disregarding the information they hold. Using a quantile regression model, we highlight the existence of herding behavior both for lower and upper quantiles. Furthermore, the period when the investors exhibit herding behavior is various: for Croatia the herding occurs in the pre-crisis period, in the case of Bulgaria, it is prevalent during crisis period, and finally for Romania it was found to be predominant in the post-crisis period.