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
The conditional PD is a borrower's probability of default under a severe, economy-wide downturn, rather than in a normal year. It is what the capital formula measures the risk weight against, and it i
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