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Journal of Applied Sciences
  Year: 2017 | Volume: 17 | Issue: 10 | Page No.: 511-517
DOI: 10.3923/jas.2017.511.517
 
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Model of Bad Debt Trading Market Development
Quuynh Pham Thi Truc and Hanh Nguyen Viet

Abstract:
Background and Objective: Lack of a theoretical framework for the development of the bad debt trading market can lead to mistakes in dealing with bad loans. So that, the purpose of this paper was to set up a model of the development of the bad debt market. Methodology: To do so, the study examined the relationship between supply and demand in the financial markets, the relationship between supply and demand, price and volume in the market of bad debt and social welfare were achieved when the market of bad debt was developed. Results: Research results indicated that when the market price of bad debt approaches the value of collateral, demand in the bad debt market tends to decrease and the supply in the bad debt market increases and vice versa. At a point where the market price of bad debt is equal to the value of collateral, commercial banks and credit institutions tend to sell off the amount of bad debt that they own and demand for the non-performing loan (NPL) market tends to be zero. The research result also showed that in order to maximize the social welfare achieved in the bad debt market or minimum social welfare in the financial market, the amount of bad debt must be sold off at a price level that equals to the value of the collateral. Conclusion: Therefore, the best way to deal with bad debt through the bad debt trading market as making the price level of and the amount of bad debt closer to the value of collateral, which could gain when stimulate the demand for NPL market develops. Additionally, the difference between the agreed price in the market of bad debt and the value of collateral could be a reliable measurement to consider the level of bad debt market development, which can help policy-makers, managers and researchers determine the level of development of the bad debt market to take out policies that stimulate the market of bad debt develops.
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How to cite this article:

Quuynh Pham Thi Truc and Hanh Nguyen Viet, 2017. Model of Bad Debt Trading Market Development. Journal of Applied Sciences, 17: 511-517.

DOI: 10.3923/jas.2017.511.517

URL: https://scialert.net/abstract/?doi=jas.2017.511.517

 
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