Chapter 14, Problem 26PS

Summary Introduction

To select: The most possible liquid method of exploiting credit risk.

Introduction:

Credit risk management: The process of borrowing and repaying the amount is continuous. The problem arises when the amount is not repaid by the borrower. Therefore, credit risk can be defined as that problem when there is a chance of incurring loss due to the non-payment of any type of debt by the borrower. Credit risk management refers to managing this problem tactfully to minimize the losses is possible by understanding the ability of the bank’s capital and loan loss reserves at any given time.