To solve the problem of setting threshold default risk criterion to select retailer eligible for trade credit granting, a novel method of solving simultaneous equations is proposed. This method is based on the bilevel...To solve the problem of setting threshold default risk criterion to select retailer eligible for trade credit granting, a novel method of solving simultaneous equations is proposed. This method is based on the bilevel programming modeling of trade credit decisions as an interaction between supplier and retailer. First, the bilevel programming is set up where the supplier decides on credit terms at the top level considering a retailer's default risk, and the retailer determines the order quantity at the lower level in response to the credit terms offered. By solving this bilevel programming, the relationship between the optimal terms and the corresponding default risk can be derived. Second, set the extreme scenario where the threshold default risk is approached as the point causing a zero marginal profit to the supplier. Another equation describing this particular scenario can also be derived. Thus, a system of two equations with two unknown variables can be obtained where the exact threshold default risk criterion can be found by solving them. A numerical example is presented as an illustration of the method proposed. It shows that the threshold criterion can be uniquely determined when the financial costs, inventory costs, and the marketing parameters of supplier and buyer are specified.展开更多
Through analysis, it is believed that major reasons for default risks in operation of small amount credit include low management level and vacancy of normative system, vacancy of risk sharing mechanism, rating distort...Through analysis, it is believed that major reasons for default risks in operation of small amount credit include low management level and vacancy of normative system, vacancy of risk sharing mechanism, rating distortion due to imperfect credit investigation system, and uncertainty of borrower's credit. On the basis of these, static and dynamic models are established to analyze the prevention mechanism for default risk in small amount credit. It is concluded that we must establish a restriction mechanism during operation of small amount credit as long as three values increase, namely, N (potential loss of bad credit record due to farmers' default), Q (probability of successful recovery by small amount credit institution), and S (cost of small amount credit institution punishing farmers after successful recovery). Finally, following countermeasures and suggestions are put forward: perfect laws and regulations and credit reward and punishment mechanism for risk management of small amount credit; bring into play proper function of loan officer in small amount credit practice; widely promote rural "Group Credit Union" system.展开更多
KMV model is one of the most important credit risk evaluation models in the world. It uses B-S option pricing and Morton formula based on the market value and volatility of the company’s equity, debt maturities, risk...KMV model is one of the most important credit risk evaluation models in the world. It uses B-S option pricing and Morton formula based on the market value and volatility of the company’s equity, debt maturities, risk-free interest rates and the book value of liabilities to estimate the market value of the company’s assets and the volatility of the asset value. In this paper, based on the theory of KMV model, we can derive the listed company’s default rate, and assess credit risk. And the result is reasonable.展开更多
This paper investigates the macroeconomic impacts of Internet finance,highlighting its advantages and challenges.Internet finance,a fusion of Internet technology with traditional financial practices,introduces innovat...This paper investigates the macroeconomic impacts of Internet finance,highlighting its advantages and challenges.Internet finance,a fusion of Internet technology with traditional financial practices,introduces innovative models for global asset management,capital financing,payments,investments,and intermediary services.While it enhances the accessibility and efficiency of financial services,it also introduces new risks,such as higher credit default rates.This study explores how Internet finance contributes to financial inclusivity and macroeconomic growth yet poses potential threats to traditional financial stability.The dual aspects of Internet finance are analyzed:its application in existing processes and its capacity to generate novel business models.Furthermore,the paper proposes strategic responses to mitigate the negative impacts of Internet finance,mainly focusing on risk management and regulatory improvements to safeguard economic stability.展开更多
This paper investigates the effect of the comprehensive information sharing on aggregate credit volume and the default ratio. Firstly, we utilize a three-stage game model developed by Dell＇Ariccia and Marquez （2006...This paper investigates the effect of the comprehensive information sharing on aggregate credit volume and the default ratio. Firstly, we utilize a three-stage game model developed by Dell＇Ariccia and Marquez （2006） to illustrate that the comprehensive information sharing would change the credit resource allocation and produce negative ＂composition effects＂ stated by Jappelli and Pagano （2005）. Then we use European Union （EU） data to test these theoretical implications. We find that when the information sharing system develops to a relatively high level, comprehensive information sharing improvements, for both the width and depth, are associated with the rise in macro credit access but also the aggregate default risk. We further find that the macro-consequences of variations in information sharing just differ in OECD and non-OECD group in EU countries. For OECD countries, the negative ＂composition effects＂ mainly arise from the increase in the width of information sharing while these effects are correlated with both the rise in depth and width indicators for non-OECD countries.展开更多
To investigate the impact of microstructure interdependency of a counterparty explicitly, a geometric function is introduced in one firm's default intensity to reflect the attenuation behavior of the impact of its...To investigate the impact of microstructure interdependency of a counterparty explicitly, a geometric function is introduced in one firm's default intensity to reflect the attenuation behavior of the impact of its counterparty firm's default. The general joint distribution and marginal distributions of default times are derived by employing the change of measure. The fair premium of a vanilla CDS (credit default swap) is obtained in continuous and discrete contexts, respectively. The swap premium in a discrete context is similar to the accumulated interest during the period between two payment days, and the short rate is the swap rate in a continuous context.展开更多
基金The National Natural Science Foundation of China (No.70502005)
文摘To solve the problem of setting threshold default risk criterion to select retailer eligible for trade credit granting, a novel method of solving simultaneous equations is proposed. This method is based on the bilevel programming modeling of trade credit decisions as an interaction between supplier and retailer. First, the bilevel programming is set up where the supplier decides on credit terms at the top level considering a retailer's default risk, and the retailer determines the order quantity at the lower level in response to the credit terms offered. By solving this bilevel programming, the relationship between the optimal terms and the corresponding default risk can be derived. Second, set the extreme scenario where the threshold default risk is approached as the point causing a zero marginal profit to the supplier. Another equation describing this particular scenario can also be derived. Thus, a system of two equations with two unknown variables can be obtained where the exact threshold default risk criterion can be found by solving them. A numerical example is presented as an illustration of the method proposed. It shows that the threshold criterion can be uniquely determined when the financial costs, inventory costs, and the marketing parameters of supplier and buyer are specified.
基金Supported by the Project for Decision-making Bidding of Henan Provincial Government (2011B546)
文摘Through analysis, it is believed that major reasons for default risks in operation of small amount credit include low management level and vacancy of normative system, vacancy of risk sharing mechanism, rating distortion due to imperfect credit investigation system, and uncertainty of borrower's credit. On the basis of these, static and dynamic models are established to analyze the prevention mechanism for default risk in small amount credit. It is concluded that we must establish a restriction mechanism during operation of small amount credit as long as three values increase, namely, N (potential loss of bad credit record due to farmers' default), Q (probability of successful recovery by small amount credit institution), and S (cost of small amount credit institution punishing farmers after successful recovery). Finally, following countermeasures and suggestions are put forward: perfect laws and regulations and credit reward and punishment mechanism for risk management of small amount credit; bring into play proper function of loan officer in small amount credit practice; widely promote rural "Group Credit Union" system.
文摘KMV model is one of the most important credit risk evaluation models in the world. It uses B-S option pricing and Morton formula based on the market value and volatility of the company’s equity, debt maturities, risk-free interest rates and the book value of liabilities to estimate the market value of the company’s assets and the volatility of the asset value. In this paper, based on the theory of KMV model, we can derive the listed company’s default rate, and assess credit risk. And the result is reasonable.
文摘This paper investigates the macroeconomic impacts of Internet finance,highlighting its advantages and challenges.Internet finance,a fusion of Internet technology with traditional financial practices,introduces innovative models for global asset management,capital financing,payments,investments,and intermediary services.While it enhances the accessibility and efficiency of financial services,it also introduces new risks,such as higher credit default rates.This study explores how Internet finance contributes to financial inclusivity and macroeconomic growth yet poses potential threats to traditional financial stability.The dual aspects of Internet finance are analyzed:its application in existing processes and its capacity to generate novel business models.Furthermore,the paper proposes strategic responses to mitigate the negative impacts of Internet finance,mainly focusing on risk management and regulatory improvements to safeguard economic stability.
文摘This paper investigates the effect of the comprehensive information sharing on aggregate credit volume and the default ratio. Firstly, we utilize a three-stage game model developed by Dell＇Ariccia and Marquez （2006） to illustrate that the comprehensive information sharing would change the credit resource allocation and produce negative ＂composition effects＂ stated by Jappelli and Pagano （2005）. Then we use European Union （EU） data to test these theoretical implications. We find that when the information sharing system develops to a relatively high level, comprehensive information sharing improvements, for both the width and depth, are associated with the rise in macro credit access but also the aggregate default risk. We further find that the macro-consequences of variations in information sharing just differ in OECD and non-OECD group in EU countries. For OECD countries, the negative ＂composition effects＂ mainly arise from the increase in the width of information sharing while these effects are correlated with both the rise in depth and width indicators for non-OECD countries.
基金The National Basic Research Program of China (973 Program)(No.2007CB814903)the National Natural Science Foundationof China (No.70671069)
文摘To investigate the impact of microstructure interdependency of a counterparty explicitly, a geometric function is introduced in one firm's default intensity to reflect the attenuation behavior of the impact of its counterparty firm's default. The general joint distribution and marginal distributions of default times are derived by employing the change of measure. The fair premium of a vanilla CDS (credit default swap) is obtained in continuous and discrete contexts, respectively. The swap premium in a discrete context is similar to the accumulated interest during the period between two payment days, and the short rate is the swap rate in a continuous context.
