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Credit limit is the maximum amount of credit an institution will extend to the client. it is a maximum risk measure. Exposure at default is a current risk measure. The amount of of credit that is extended to a client at any given time will generally be less than the credit limit. It is more of a current state snapshot of the exposure or risk the ...


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EAD can also be higher than credit limit because of adding the costs of collection activities, noting that these can take a long time. As you mention, the credit limits will tend to have been maxed out, but also missed payments and accruing interest may have increased the exposure before the point in time at which the default is established (definitional ...


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