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The recovery rate is defined as 1 minus the LGD, the share of an asset that is recovered when a borrower defaults. [ 1 ] Loss given default is facility-specific because such losses are generally understood to be influenced by key transaction characteristics such as the presence of collateral and the degree of subordination.
The key variables for (credit) risk assessment are the probability of default (PD), the loss given default (LGD) and the exposure at default (EAD).The credit conversion factor calculates the amount of a free credit line and other off-balance-sheet transactions (with the exception of derivatives) to an EAD amount [2] and is an integral part in the European banking regulation since the Basel II ...
For example, $225K would be understood to mean $225,000, and $3.6K would be understood to mean $3,600. Multiple K's are not commonly used to represent larger numbers. In other words, it would look odd to use $1.2KK to represent $1,200,000. Ke – Is used as an abbreviation for Cost of Equity (COE).
Probability of default (PD) is a financial term describing the likelihood of a default over a particular time horizon. It provides an estimate of the likelihood that a borrower will be unable to meet its debt obligations.
This cost is then allocated to each business line of an investment bank (usually as a contra revenue). This allocated cost is called the "CVA Charge". A Credit valuation adjustment ( CVA ), [ a ] in financial mathematics , is an "adjustment" to a derivative's price, as charged by a bank to a counterparty to compensate it for taking on the ...
Exposure at default or (EAD) is a parameter used in the calculation of economic capital or regulatory capital under Basel II for a banking institution. It can be defined as the gross exposure under a facility upon default of an obligor.
Business analytics (BA) refers to the skills, technologies, and practices for iterative exploration and investigation of past business performance to gain insight and drive business planning. Business analytics focuses on developing new insights and understanding of business performance based on data and statistical methods .
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