Credit Risk Assessment

Topics: Risk management, Risk / Pages: 7 (1646 words) / Published: May 30th, 2013
Research Proposal on ASESSMENT OF CREDIT RISK IN FINANCIAL MANAGEMENT
Labels: Credit Risk Research Proposals, Financial Management Research Proposals

RESEARCH TITLE

ASESSMENT OF CREDIT RISK IN FINANCIAL MANAGEMENT

THE ABSTRACT

This proposal study explores financial credit risk assessment. This is an important issue because there is currently no standardized method used by financial institutions for the assessment of credit risk. There needs for a critical evaluation of the most popular credit risk assessment methods such as the judgmental method, credit-scoring and portfolio models along with limitations used. Survey interview process is needed for confirming that credit risk assessment methods should be combined for effective credit risk assessment. Accordingly, the study proposes a framework for improving credit risk assessment, which combines the strengths of these methods and copes successfully with study limitations.

INTRODUCTION

Credit risk covers risks due to upgrading or downgrading a borrower's credit worthiness which depend ob the potential sources of the risk who the client may be and who uses it as banks in particular are devoting a considerable amount of time and thoughts to defining and managing credit risk. There are two sources of uncertainty in credit risk: default by a party to a financial contract and a change in the present value of future cash flows that result from changes in financial market conditions as well as changes in the economic development. Credit risk considerations underlie capital adequacy requirements regulations that are required by financial institutions but financial borrowing as well as lending transactions are sensitive to credit risk, to protect themselves firms and individuals turn to rating agencies to obtain an assessment of the risks of bonds, stocks and financial papers they may acquire and after a careful reading of these ratings the investors, banks and financial

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