Bond Finance, Bank Finance, and Bank Regulation

Ji, Huang

doi:10.2139/ssrn.3312369

Cited by 1 publication

(2 citation statements)

References 45 publications

(36 reference statements)

Supporting

Mentioning

Contrasting

Order By: Relevance

“…The proposed models are based on the assumption that any loan can be presented as the bank's investment project with such attributes as initial outflow (principal), following inflows in the form of loan payments and bank's cost of capital. We deduced the formulas for calculating the expected net present value for classic (1), annuity (12), and serial (19) loans that can be used as a targeted measure of the loan's economic effect for a bank at the moment of loan issue. For the cases of problem loans where borrower breaks the loan's payment schedule and it leads to the reduction of the loan's expected NPV we developed calculating formulas for the loan terms' rescheduling:…”

Section: Discussionmentioning

confidence: 99%

“…The restructuring techniques like debt-equity swap and write-offs to ease debtors' debts and to help viable businesses to successfully survive recession have been analyzed by Dedu [18]. The duration models to analyze the factors affecting the duration of private debt restructuring for distressed firms were represented by Jiang-Chuan et al [19].…”

Section: Discussionmentioning

confidence: 99%

See 1 more Smart Citation

Econometric modelling of bank activities: value-based approach to the problem loans terms’ rescheduling

2021

View full text Add to dashboard Cite

The permanent state of the financial crisis has predictably brought to the forefront such traditional problem of banking as problem loans. This research aims to work out an econometric approach to the solution of the problem of loans terms’ rescheduling. For this purpose, we, firstly, treated credit as a bank’s investment project with cashflows’ chart including initial outflow (principal) and following inflows represented by loan payments. Secondly, we combined the schematic representation of loan’s cashflows with NPV formula accustomed to loan’s cashflows and it allowed to create the econometric models for three types of loan: classic, annuity, serial. Thirdly, for the case when borrower breaks a loan’s payment schedule and it leads to the reduction of loan’s NPV and loss of the wealth of bank’s shareholders, respectively, we outlined special compensative models of cashflows where default in payment is interpreted by the lender as an additional forced loan. We suggested modifying the loan terms (interest rate or effective period of the loan agreement) for the rest of payment periods. Fourthly, we laid the special compensative models of forced loans’ cashflows a top corresponded initial cashflows of loans and this has made it possible to get formulas calculating the modified interest rate and the additional number of loans’ payment periods with the aid of backward calculation. As a result, we developed the econometric models of the loan terms’ modifications based on the prolongation of the initial credit period and the increasing of the initial interest rate.

show abstract

Section: Discussionmentioning

confidence: 99%

Section: Discussionmentioning

confidence: 99%