Credit risk management in financial institutions

Pao Yue-kong Library Electronic Theses Database

Credit risk management in financial institutions

 

Author: Wong, Chor-heung Verena
Title: Credit risk management in financial institutions
Degree: M.B.A.
Year: 1999
Subject: Bank management
Risk management
Neural networks (Computer science) -- Design and construction
Hong Kong Polytechnic University -- Dissertations
Department: Dept. of Management
Pages: v, 91, [71] leaves : ill. ; 30 cm
Language: English
InnoPac Record: http://library.polyu.edu.hk/record=b1471863
URI: http://theses.lib.polyu.edu.hk/handle/200/2350
Abstract: Credit risk management becoming significantly important to financial institutions during the current Asian financial crisis. Being able to form highly reliable early forecasts of the future health of companies is critically important to bank lending officers. One of the widely adopted model in the United States to evaluate the financial health of a company is the Z-score developed by Edward I. Altman thirty years before. It was found that the model is not so reliable by computing our selected samples as overall forecast error was over 50%. If Z-score had to used to predict Hong Kong companies, coefficient used had to adjust. This study compares the predictive capabilities for loan classification of neural networks and classical multivariate discriminant analysis Z-score. This study found that neural network performs significantly better than the Z-score at loan classification. Forecasting error on all case is below 10%.

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