Trade Credit Use as Firms Approach Default

Trade Credit and Credit Rationing in Canadian Firms

Burkart and Ellingsen’s (2004) model of trade credit and bank credit rationing predicts that trade credit will be used by medium-wealth and low-wealth firms to help ease bank credit rationing. The author tests these and other predictions of Burkart and Ellingsen’s model using a large sample of more than 28,000 Canadian firms. She uses an endogenous method to divide the firms into the appropriat...

Optimal replenishment and credit policy in supply chain inventory model under two levels of trade credit with time- and credit-sensitive demand involving default risk

Traditional supply chain inventory modes with trade credit usually only assumed that the up-stream suppliers offered the down-stream retailers a fixed credit period. However, in practice the retailers will also provide a credit period to customers to promote the market competition. In this paper, we formulate an optimal supply chain inventory model under two levels of trade credit policy with d...

Valuation of Credit Default Swaptions and Credit Default Index Swaptions

An Empirical Investigation of Trade Credit Use

This paper investigates empirically the theoretical motivations for the use of trade credit by firms for purchases. The extent to which trade credit is used for purchases and the accounts payable to total assets ratio, i.e. the demand for trade credit, are modelled here as a function of transaction costs motivations, financing motivations, operational considerations, seller compliance issues, s...

Tails of Credit Default Portfolios

We derive analytic expressions for the tail behavior of credit losses in a large homogeneous credit default portfolio. Our model is an extended CreditMetrics model; i.e. it is a one-factor model with a multiplicative shock-variable. We show that the first order tail behavior is robust with respect to this shockvariable. In a simulation study we compare different models for the latent variables....