View source for Ability and Willingness to Pay

== Definition ==
'''Ability and Willingness to Pay''' is a phrase that aims to capture at a very fundamental level the nature of the possible [[Risk Factor | risk factors]] behind a [[Credit Event]], an entity defaulting (reneging) on any of its legal defined financial commitments

=== Ability to Pay ===
Ability to Pay captures in a summary view the availability to the concerned entity of funds (economic means) to fulfill the assumed obligation

=== Willingness to Pay ===
Willingness to Pay is a summary view of the mindset of the concerned entity (as an economic agent) versus actually fulfilling their assumed obligations. Unwillingness to pay when there is ability to do so is in some contexts denoted as [[Strategic Default]] 

== See Also ==
* [[Creditworthiness]]

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[[Category:Credit Risk]]