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    Modeling SME credit ratings using non-homogenous backward semi-Markovian approach

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    Fulltext thesis (628.3Kb)
    Date
    2017
    Author
    Magarita, Sara Muya
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    Abstract
    Considering the growth in SME lending in Kenya and the obvious risks it posses to the banking sector, we establish a credit risk model that is responsive to the jumps in the economy. This is based on simulation of implied values of credit worthiness over a period of 12 months for 1000 SMEs, in which case we establish a case for the discrete time non-homogeneous semi-Markov approach as a proxy for internal rating model for a portfolio of SME loans. While viewing credit risk as a reliability issue, the model provides a credit indicator which gives a prospective measure of credit risk for an SME portfolio. Banks seeking to comply with the new IFRS9 guidelines can espouse this model to adequately measure impairment of financial instruments.
    URI
    http://hdl.handle.net/11071/5573
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    • MSc.MF Theses and Dissertations (2017) [3]

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