Author(s)

Bohan Liu ¹, Yuying Li ¹, Ping Yu ¹

Affiliation(s)

¹ Swinburne College, Shandong University of Science and Technology, Jinan, China

Corresponding Author

Ping Yu

ABSTRACT

Although floating mortgage has been permitted in China, Asset based finance has not been carried out in practice. This article constructs an endogenous model of default probability for a single period, and optimizes the expected return rate of banks based on the borrower's operational risk and collateral risk. Research has found that for the contract dominated by bank, the determination of mortgage rate requires a comprehensive consideration of both borrower default probability and bank default losses, and an optimal mortgage rate is existed; Banks need to increase interest rates or reduce collateral ratios to cope with the increased risk of collateral.

KEYWORDS

Asset-based financing, Supply chain finance, Floating mortgage, Asset-backed loan, Default risk

CITE THIS PAPER

Bohan Liu, Yuying Li, Ping Yu, Business Model and Risk Management on Asset-based Financing. Financial Engineering and Risk Management (2024) Vol. 7: 187-191. DOI: http://dx.doi.org/10.23977/ferm.2024.070324.

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