A Credit Risk Modelling Approach to Assess Supplier Default Risk

Stephan M. Wagner () and Christoph Bode ()
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Stephan M. Wagner: Swiss Federal Institute of Technology Zurich (ETH Zurich)
Christoph Bode: Swiss Federal Institute of Technology Zurich (ETH Zurich)

A chapter in Operations Research Proceedings 2010, 2011, pp 471-476 from Springer

Abstract: Abstract The purpose of this paper is to quantify the supplier default risk in a buying firm’s supplier portfolio. Based on credit risk models, we develop a methodology that buying firms can use to pro-actively determine their exposure to supplier default risk. To illustrate the proposed methodology, we use empirical data pertaining to supplier portfolios of executive-size car models from three German automotive OEMs. We show that some supplier portfolios are exposed to higher default risk which places them at a disadvantage, because they face a higher probability that the supply of components can be disrupted and cars cannot be built and sold.

Date: 2011
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Persistent link: https://EconPapers.repec.org/RePEc:spr:oprchp:978-3-642-20009-0_75

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DOI: 10.1007/978-3-642-20009-0_75

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