Credit Risk Fundamentals › Key Parameters
Michael BrenndoerferDecember 21, 20251 min read
Quantitative FinanceAll chapters Part 10 of 15Risk Management and Financial Risk Controls
Credit Risk Fundamentals › Key ParametersOne section · Sections in this chapter7 / 15 ↓
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The key parameters for Exposure at Default calculations are:
- Commitment Size: The total credit limit available to the borrower.
- Drawn Amount: The portion of the credit line currently utilized.
- CCF (Credit Conversion Factor): The percentage of the undrawn commitment expected to be drawn before default.
- Mark-to-Market: The current replacement cost of a derivative contract.
- Notional Amount: The reference amount used to calculate payments, driving potential future exposure.
- Maturity: Time remaining in the contract. Longer maturities typically attract higher add-on factors for potential future exposure.