Stability of Evolutionary Equilibrium on Small Business Credit Risk

Abstract

In this paper the credit risk of enterprise is represented by three factors: the probability for enterprise to lie to banks 1-Y, the probability for banks to check enterprise Xand the probability for banks of obtaining the real revenue of the enterprise q. Then we construct a replicator dynamics model about banks and enterprise's strategy, and analyze the stability of evolutionary equilibrium. Meanwhile we also consider the effect of the legislation and collateral on credit risk. By using simulation analysis, we study the direction of banks and business strategy evolvement path. At last some advice to control small business credit risk has been presented.