Credit risk mangement in finance - a review of various approaches

Journal Title: Operations Research and Decisions - Year 2018, Vol 28, Issue 4

Abstract

Classification of customers of banks and financial institutions is an important task in today’s business world. Reducing the number of loans granted to companies of questionable credibility can positively influence banks’ performance. The appropriate measurement of potential bankruptcy or probability of default is another step in credit risk management. Among the most commonly used methods, we can enumerate discriminant analysis models, scoring methods, decision trees, logit and probit regression, neural networks, probability of default models, standard models, reduced models, etc. This paper investigates the use of various methods used in the initial step of credit risk management and corresponding decision process. Their potential advantages and drawbacks from the point of view of the principles for the management of credit risk are presented. A comparison of their usability and accuracy is also made.

Authors and Affiliations

Aleksandra WÓJCICKA-WÓJTOWICZ

Keywords

Related Articles

A study on the influence of the discretisation unit on the effectiveness of modelling currency exchange rates using the binary-temporal representation

An exchange rate can be expressed in the form of a binary-temporal representation. Such a representation is based on a discretization of movements in the exchange rate, in which to each change in the value - equal to a g...

Innovation management in Polish enterprises

The modern enterprise operates in a turbulent, demanding and unstable environment. Technical and technological progress as well as socioeconomic development create new opportunities but, at the same time, they force ente...

Robust bi-level optimization for an opportunistic supply chain network design problem in an uncertain and risky environment

This paper introduces the problem of designing a single-product supply chain network in an agile manufacturing setting under a vendor managed inventory (VMI) strategy to seize a new market oppor-tunity. The problem addre...

Choosing what to protect when attacker resources and asset valuations are uncertain

The situation has been modelled where the attacker’s resources are unknown to the defender. Protecting assets presupposes that the defender has some information on the attacker’s resource capabilities. An attacker target...

Two procedures for robust monitoring of probability distributions of economic data stream induced by depth functions

Data streams (streaming data) consist of transiently observed, evolving in time, multidimensional data sequences that challenge our computational and/or inferential capabilities. We propose user friendly approaches for r...

Download PDF file
  • EP ID EP470847
  • DOI 10.5277/ord180407
  • Views 38
  • Downloads 0

How To Cite

Aleksandra WÓJCICKA-WÓJTOWICZ (2018). Credit risk mangement in finance - a review of various approaches. Operations Research and Decisions, 28(4), 99-106. https://europub.co.uk/articles/-A-470847