I would like to read something about the cost of risk. Could anyone recommend some reference about how it is calculated or modelled?

  • $\begingroup$ Can you be more specific? Cost of credit risk in what capacity? $\endgroup$
    – dmanuge
    Dec 14, 2015 at 16:14
  • $\begingroup$ It is mentioned in this report: unicreditgroup.eu/content/dam/unicreditgroup/documents/en/… There is also a presentation here: www2.humusoft.cz/www/papers/finsem13/finsem13-neckar.pdf $\endgroup$
    – Egodym
    Dec 14, 2015 at 16:27
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    $\begingroup$ It is defined on Page 280 (took me a while to get there) as: Cost of risk The ratio between loan loss provisions and loans and receivables with customers. It is one of the indicators of the bank assets’ level of risk: the lower the ratio, the less risky the bank assets. $\endgroup$
    – nbbo2
    Dec 14, 2015 at 16:39
  • $\begingroup$ And what about the presentation? It talks about "cost of credit risk", and consider the cost of risk as a method to calculate it (slide 18). I guess the interesting case is when $Cost Of Risk = provisions/reserves$. How can I model this quantity? $\endgroup$
    – Egodym
    Dec 14, 2015 at 17:01


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