A Study On Alarm Value Of Floating Charge Under The Supervision Of The Third Party

A floating charge is a security interest over a fund of changing assets of a companyor a limited liability partnership (LLP)， which ’floats’ or ’hovers’ until the point atwhich it is converted into a fixed charge(called "crystallisation")， at which point thecharge attaches to specific assets of the company or LLP. The floating charge allowsSME to achieve chattel secured financing in a new way. Also it has become the newprofit point of commercial Banks. The particularity of floating mortgage requires bankto make innovation in mechanism based on the traditional model of credit，byintroducing professional third party supervision. But at the same time， financialinnovation means new risks.To ensure that the floating charge works well， it requireseffective risk control methods，and the key is setting a reasonable alarm value.In order to decrease and avoid credit risk in floating charge，chattel value mustcover the loan and interest. And because the mortgaged property has been changing allthe time， the commercial bank will set an alarm value to ensure the security of thecreditor’s rights， and entrust an independent third party to monitor the mortgagedproperty dynamically， when the floating mortgage total value is less than the alarmvalue， it will trigger the conversion into a fixed charge，thus it can ensure the freedomin management for SME as well as ensure that there is enough value of the mortgagedproperty to slow-release credit risk. The early warning value is the third partysupervision basis， as the key indicators of floating mortgage business risk control，how to determine the scientific and reasonable index is very important. Throughreasonable design of structure， the floating mortgage business risk sources are mainlyconcentrated in the mortgaged property price risk， so it is necessary to analyze thevolatility of price series to design a reasonable warning value.In this paper，I analyzed the characteristics of floating mortgage based on theoryof transaction cost， and the theory of asymmetric information，and studied how todesign alarm value from the perspective of Banks. The key to determine early-warningvalue of floating charge is to predict long-term price risk. Under the background of thechanging economic environment， the spot commodity price sequence tend to have thecharacteristics of structural breaks，take the Yangtze river nonferrous metals market forexample，use the ICSS algorithm to detect change point and by adding virtual variables， and the modified Garch model fits better to price fluctuations than the old one. Thisarticle assumes that the enterprise has endogenous default probability and commercialbank hates risk， then rely on long-term modified VaR model to calculate aearly-warning value adjusting to the preference of bank. At the same time， the studyalso found that: considering the structure mutation can describe risk more accurately，and long-term modified VaR predicts risk more reasonably than the old one.