Loan-to-value ratio for inventory financing loan under structural breaks

Abstract

Using nonparametric ICSS algorithm to detect structural breaks of volatility, the author has made study of structural breaks and liquidity risk models, and provides a detailed comparative analysis of effects on loan-to-value ratio for inventory financing under structural breaks among different holding periods and different risk models by taking China eastern silk market as research object. Two conclusions can be drawn. Firstly, VaR model incorporated liquidity risk under structural breaks can measure the aggregate risk more precisely for inventory financing loan. The greater liquidity risk that account for aggregate risks, the shorter period that inventories are held, vice versa Secondly, These models incorporated liquidity risk considering structural breaks can measure more precisely market risk, liquidity risk and loan-to-value ratio for inventory financing loan.