For Example : if Risk weighted asset (RWA) increased or decreased this month, which other risk metrics could have influenced RWA to increase or decrease. Also in different situations like, upward trend, sudden increase, downward trend, sudden decrease, neutral or stable RWA. I want to understand and trying to create a document for my reference and learning purpose.

  • $\begingroup$ very complicated question, RWA is influenced by credit/market/operational risk, etc. $\endgroup$ – adam Feb 25 '16 at 10:22

Our paper answers this question in the admittedly simple context of Expected Loss (EL) calculated as the straightforward summation of EAD * PD * LGD from the granular level.

EL here is the surrogate for your RWA, and the risk metrics are the granular data (EAD, PD, LGD).

The paper proposes how changes in EL can then be attributed / apportioned to changes in each of the risk metrics.

Hunt, C.; Taplin, R. Aggregation of Incidence and Intensity Risk Variables to Achieve Reconciliation. Risks 2019, 7, 107. https://www.mdpi.com/2227-9091/7/4/107


Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.