Risk-based pricing of financial products

dc.contributor.authorMukatuni, Awelani Lynn
dc.date.accessioned2023-01-13T08:20:43Z
dc.date.available2023-01-13T08:20:43Z
dc.date.issued2022
dc.descriptionThe thesis is submitted to the Faculty of Commerce, Law and Management in partial fulfilment of the requirements for the Master of Management in Finance and Investment
dc.description.abstractThis is an analytical research that aims to contribute to the discussions around risk-based pricing of financial products. It aims at contributing a better understanding of the risk-based pricing model, its pros and cons, and areas of improvement in the consumer credit environment. The study uses real-life data and the risk-based pricing model to analyse suitable credit prices that would allow more people to afford taking up credit. The study uses the relationship between price sensitivity and the offered interest rate to support offered credit prices. The study also aims to analyse the national credit act regulations on the maximum interest rate that an institution can offer. The study includes sample calculations that were drawn from Standard and Captec banks under the assumption that the two banks are using the risk-based pricing model. The results revealed that the model allows for more borrowers to have access to credit by allowing lenders to charge a high interest rate to high-risk borrowers. The model rewards low risk borrowers and compensates lenders for extending credit to high-risk borrowers. An analysis of the National Credit Act (NCA) revealed that it allows for banks and borrowers to maximise profit and marginalise a great number of borrowers at the same time. Due to its simplicity, the NCA becomes a good model to use as a basis for offering interest rates for high-risk borrowers, thus increasing the number of borrower classes.
dc.description.librarianPC2023
dc.facultyFaculty of Commerce, Law and Management
dc.identifier.urihttps://hdl.handle.net/10539/34037
dc.language.isoen
dc.rights.holderUniversity of the Witswatersrand, Johannesburg
dc.schoolWits Business School
dc.subjectPre-distribution and Ownership
dc.subjectFinancial product
dc.subjectRisk-Based Pricing
dc.subjectFinancial risks
dc.subjectCredit
dc.subjectCredit price
dc.subjectPrice sensitivity
dc.subject.otherSDG-8: Decent work and economic growth
dc.titleRisk-based pricing of financial products
dc.typeDissertation

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