Research on Risks of Letter of Credit Settlement Based on Factor
Analysis and System Dynamics Simulation
Abstract
Targeting at the problems in the risk assessment and control processes
of the letter of credit settlement in China’s export enterprises so far,
it first adopts the quantitative method and exploratory factor analysis
to extract the main factors. On the basis, the software VENSIM is used
to design the dynamics causes tree and the flow chart of the letter of
credit system. Next, the equation sets of DANAMO parameters are also
constructed with the software. Finally, through observation of the
system risk fluctuation diagram with system simulation, it gives
enterprises some advice on how to identify risk points and how to
prevent and control letter of credit risks in advance.