<abstract xmlns="http://www.w3.org/1999/xhtml"><p>The purpose of this paper is to derive a model for calculation of maturities and volumes of repayments that a bank may expect from nonretail nonperforming loans (hereafter NPLs). Expected inflows from nonretail NPLs follow a probability distribution, defined by size and timing of historic repayments of NPLs. Empirical analysis has shown that probability distribution of expected inflows from nonretail NPLs considerably deviates from symmetric distribution and is asymmetric to the right. Accuracy of derived model depends upon available data in banks about NPLs by corporate sectors and recovery rates by time intervals. The model in this paper is in interest of any bank and in particular of banks with a higher fraction of NPLs in their loan portfolio. Contribution of this paper to the added value in the area of liquidity risk management in banks is high because the remaining literature does not deliver other models for the same purpose.</p></abstract>

The purpose of this paper is to derive a model for calculation of maturities and volumes of repayments that a bank may expect from nonretail nonperforming loans (hereafter NPLs). Expected inflows from nonretail NPLs follow a probability distribution, defined by size and timing of historic repayments of NPLs. Empirical analysis has shown that probability distribution of expected inflows from nonretail NPLs considerably deviates from symmetric distribution and is asymmetric to the right. Accuracy of derived model depends upon available data in banks about NPLs by corporate sectors and recovery rates by time intervals. The model in this paper is in interest of any bank and in particular of banks with a higher fraction of NPLs in their loan portfolio. Contribution of this paper to the added value in the area of liquidity risk management in banks is high because the remaining literature does not deliver other models for the same purpose.

Modeling of Cash Flows from Nonperforming Loans in a Commercial Bank

Naše gospodarstvo/Our economy

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

{"article-title":"Modeling of Cash Flows from Nonperforming Loans in a Commercial Bank"}

The purpose of this paper is to derive a model for calculation of maturities and volumes of repayments that a bank may expect from nonretail nonperforming...

Modeling of Cash Flows from Nonperforming Loans in a Commercial Bank

Data publikacji: 31 gru 2018

Zakres stron: 3 - 9

Otrzymano: 01 paź 2018

Przyjęty: 01 lis 2018

DOI: https://doi.org/10.2478/ngoe-2018-0018

Słowa kluczowe
bank, liquidity risk, cash flow modeling, credit risk, non-performing loans

© 2018 Srečko Devjak, published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

Modeling of Cash Flows from Nonperforming Loans in a Commercial Bank

Data publikacji: 31 gru 2018

Zakres stron: 3 - 9

Otrzymano: 01 paź 2018

Przyjęty: 01 lis 2018

DOI: https://doi.org/10.2478/ngoe-2018-0018

Słowa kluczowebank, liquidity risk, cash flow modeling, credit risk, non-performing loans

© 2018 Srečko Devjak, published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

Słowa kluczowe
bank, liquidity risk, cash flow modeling, credit risk, non-performing loans