• Journal of applied mathematics & informatics
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• v.39 no.5_6
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• pp.677-688
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• 2021

In the modern financial market, the scale of financial instrument transactions in the over-the-counter (OTC) market are increasing. However, in this market, there exists a counterparty credit risk. Herein, we obtain a closed-form solution of power option with credit risks, using the double Mellin transforms. We also use a numerical method to compare the differentiations of option price between the closed-form solution and Monte-Carlo simulation. The result shows that the closed-form solution is precise. In addition, the option's price is sensitive to the exponent of the maturity stock price.

• THE INTERNATIONAL COMMERCE & LAW REVIEW
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• v.42
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• pp.133-160
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• 2009

In International trade the buyer and seller are normally separated from on another not only by distance but also by differences in language and culture. It is rarely possible for the performance of obligations to be simultaneous and the performance of contracts therefore calls for trust in a situation in which the parties are unlikely to feel able to trust each other unless they have a longstanding and successful relationship. Thus the seller under an international contract of sale will not wish to surrender documents of title to goods to the buyer until he has at least an assurance of payment, and no buyer will wish to pay for goods until he has received them. A gap of distrust thus exists which is often bridged by the undertaking of an intermediary known and trusted by both parties who will undertake on his own liability to pay the seller the contract price in return for the documents of title and then pass the documents to the buyer in return for the reimbursement. This is a common explanation of the theory behind the documentary letter of credit in which the undertaking of a bank of international repute serves as a "guarantee" to each party that the other will perform his obligations. The independence principle, also referred to as the "autonomy principle", is at the core of letter of credit or bank guarantee law. This principle provides that the letter of credit or bank guarantee is independent of the underlying contractual commitment - that is, the transaction that the credit is intented to secure - between the applicant and the beneficiary ; the credit is also independent of the relationship between the bank and its customer, the applicant. The most important exception to the independence principle is the doctrine of fraud in the transaction. A strict interpretation of the rule that the guarantee is independent of the underlying transaction would lead to the conclusion that neither fraud nor manifest abuse of rights by the beneficiary would constitute an objection to payment. There is one major problem related to "Independent guarantees", namely abusive or unfair callings. The beneficiary may make an unfair calling under the guarantee. The countermeasure of beneficiary's unfair calling divided three cases. First, advance countermeasure namely by contract. In other words, when the formation of the contract, the parties must insert the Force Majeure Clause, Arbitration Clause to Contract, and clear statement to the condition for demand calling. Second, post countermeasure namely by court. Many countries, including the United States, authorize the courts to grant an order enjoining the issuer from paying or enjoining the beneficiary from receiving payment under the guaranty letter. Third, Export Insurance. For example, the Export Credit Guarantees Department is prepared, subject to certain conditions, to cover the risk of unfair calling. Of course, KEIC in Korea is cover the risk of the all things for guarantees. On international projects, contractor performance is usually guaranteed by either a standby letters of credit or Independent guarantee. These instruments will be care the parties.

• Journal of the Korea Academia-Industrial cooperation Society
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• v.15 no.1
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• pp.129-136
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• 2014

This paper examines the effects of dominating large shareholders and foreign blockholders on credit ratings. An effective governance mechanism is expected to lead to higher credit ratings through its impact on default risk of the firm. Our results show that dominating large shareholders have an adverse impact on credit ratings of domestic firms on the level of its statistical significance. Foreign shareholders are positively associated with credit ratings, contributing to the higher credit worthness of domestic firms.

• Communications for Statistical Applications and Methods
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• v.27 no.3
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• pp.327-347
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• 2020

We consider a credit portfolio with highly skewed exposures. In the portfolio, small number of obligors have very high exposures compared to the others. For the Bernoulli mixture model with highly skewed exposures, we propose a new importance sampling scheme to estimate the tail loss probability over a threshold and the corresponding expected shortfall. We stratify the sample space of the default events into two subsets. One consists of the events that the obligors with heavy exposures default simultaneously. We expect that typical tail loss events belong to the set. In our proposed scheme, the tail loss probability and the expected shortfall corresponding to this type of events are estimated by a conditional Monte Carlo, which results in variance reduction. We analyze the properties of the proposed scheme mathematically. In numerical study, the performance of the proposed scheme is compared with an existing importance sampling method.

• Smart Media Journal
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• v.13 no.4
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• pp.9-15
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• 2024

Tree-based algorithms have been the dominant methods used build a prediction model for tabular data. This also includes personal credit data. However, they are limited to compatibility with categorical and numerical data only, and also do not capture information of the relationship between other features. In this work, we proposed an ensemble model using the Transformer architecture that includes text features and harness the self-attention mechanism to tackle the feature relationships limitation. We describe a text formatter module, that converts the original tabular data into sentence data that is fed into FinBERT along with other text features. Furthermore, we employed FT-Transformer that train with the original tabular data. We evaluate this multi-modal approach with two popular tree-based algorithms known as, Random Forest and Extreme Gradient Boosting, XGBoost and TabTransformer. Our proposed method shows superior Default Recall, F1 score and AUC results across two public data sets. Our results are significant for financial institutions to reduce the risk of financial loss regarding defaulters.

• Journal of Applied Reliability
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• v.2 no.2
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• pp.99-112
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• 2002

Risk financing is defined as the methods applied to fund risk treatment and the financial consequences of risk. It is a major component of the transfer of risk and the retention of risk which are, in turn, parts of the risk treatment process. This study applied the general guidelines on risk financing to product liability risk. Product liability risk occurs when potential defects in the process of design, production, and distribution lead to accidents resulting in fatal, financial, and environmental loss. Risk on product liability may be financed in many different ways, each of which may be used singularly or in combination. The most popular and recommendable way suggested in the guidelines is the retention or use of reserves, transfer, credit or insurance.

• The Korean Journal of Financial Management
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• v.26 no.3
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• pp.171-198
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• 2009

The primary purpose of this study is to examine the impact of new BIS regulation, which is the preparations to incorporate not only credit risk but also market and operation risk, on the bank behaviors. As methodology, SUR(seemingly unrelated regression) and pool unit test are used in the empirical analysis of banks survived in Korea. It is employed that quarterly data of BIS capital ratio, ratio of standard and below loans to total loans, ratio of liquid assets to liquid liabilities, allowances for credit losses, real GDP, yields of corporate bonds(3years, AA) covering the period of 2000Q1~2009Q1. As a result, it could be indicated that effectiveness and promoting improvements of BIS capital regulation policy as follows; First, it is explicitly seen that weight of lending had decreased and specific gravity of international investment had increased until before BIS regulation is built up a step for revised agreement in late 2001. Second, after more strengthening of BIS standard in late 2002, banks had a tendency to decrease the adjustment of assets weighted risk through issuing of national loan that is comparatively low profitability. Also, it is implicitly sought that BIS regulation is a bit of a factor to bring about credit crunch and then has become a bit of a factor of economic stagnation. Third, as the BIS regulation became hard, it let have a effort to raise the soundness of a credit loan because of selecting good debtor based on its credit ratings. Fourth, it should be arranged that the market disciplines, the effective superintendence system and the sound environment to be able to raise enormous bank capital easily, against the credit stringency and reinforce the soundness of banks etc. in Korea capital market.

• Journal of the Korean Data and Information Science Society
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• v.24 no.3
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• pp.411-425
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• 2013

The importance and necessity of the credit loan are increasing over time. Also, it is a natural consequence that the increase of the risk for borrower increases the risk of non-performing loan. Thus, we need to predict accurately in order to prevent the loss of a credit loan company. Our final goal is to build reliable and accurate prediction model, so we proceed the following steps: At first, we can get an appropriate sample by using several resampling methods. Second, we can consider variety models and tools to fit our resampling data. Finally, in order to find the best model for our real data, various models were compared and assessed.

• Journal of Digital Convergence
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• v.17 no.9
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• pp.71-78
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• 2019

This study aims to identify good borrowers within the context of P2P lending. P2P lending is a growing platform that allows individuals to lend and borrow money from each other. Inherent in any loans is credit risk of borrowers and needs to be considered before any lending. Specifically in the context of P2P lending, traditional models fall short and thus this study aimed to rectify this as well as explore the problem of class imbalances seen within credit risk data sets. This study implemented an over-sampling technique known as Synthetic Minority Over-sampling Technique (SMOTE). To test our approach, we implemented five benchmarking classifiers such as support vector machines, logistic regression, k-nearest neighbor, random forest, and deep neural network. The data sample used was retrieved from the publicly available LendingClub dataset. The proposed SMOTE revealed significantly improved results in comparison with the benchmarking classifiers. These results should help actors engaged within P2P lending to make better informed decisions when selecting potential borrowers eliminating the higher risks present in P2P lending.

• Korean Management Science Review
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• v.28 no.2
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• pp.1-16
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• 2011

In this study we suggested two optimization models to answer a question from an investor standpoint : how many convertible bonds should one convert, and how many keep? One model minimizes certain risk to the minimum required expected return, the other maximizes the expected return subject to the maximum acceptable risk. In comparison with Markowitz portfolio models, which use the variance of return, our models used Conditional Value-at-Risk(CVaR) for risk measurement. As a coherent measurement, CVaR overcomes the shortcomings of Value-at-Risk(VaR). But there are still difficulties in solving CVaR including optimization models. For this reason, we adopted Rockafellar and Uryasev's[18, 19] approach. Then we could approximate the models as linear programming problems with scenarios. We also suggested to extend the models with credit risk, and applied examples of our models to Hynix 207CB, a convertible bond issued by the global semiconductor company Hynix.