APPLICATION OF CREDIT RATING MODELS IN FINANCIAL SECTOR

Keywords:
risk premium, risk-based pricing, reverse factoring.

Abstract:
This paper presents some applications of credit rating models that exploit the probability of default and loss in case of default when calculating the risk premium. The paper outlines the general risk-based pricing framework and illustrates it through numerical estimation of risk premium for reverse factoring, a banking product that is widely used in international trade. Based on the financial reports, we have calculated the probabilities of default for Serbian non-financial enterprises, and the corresponding risk premium. The results obtained have enabled assessing the product’s potential on the local market.

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M. Božović, “APPLICATION OF CREDIT RATING MODELS IN FINANCIAL SECTOR,” in FINIZ 2015 - Contemporary Financial Management, Belgrade, Singidunum University, Serbia, 2015, pp. 155-160. doi: 10.15308/finiz-2015-155-160 

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Božović, M. (2015). APPLICATION OF CREDIT RATING MODELS IN FINANCIAL SECTOR. Paper presented at FINIZ 2015 - Contemporary Financial Management. doi:10.15308/finiz-2015-155-160

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