This notebook compares the risk weight the two approaches produce for the same exposure, as its PD varies. The FIRB weight moves with the PD; the STD weight does not, so it stands as a fixed level for
The maturity factor scales the risk weight up as an exposure runs for longer. A loan that matures in five years ties up capital, and stays exposed to a downturn, for far longer than one that matures i
Loan 1 and Loan 2 are the same loan to the same counterparty, differing only in that Loan 2's obligor has defaulted. This comparison is about unexpected loss and expected loss, and how the two approac
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