What is Credit Risk?
Credit risk is the possibility of financial losses for a lender or investment due to a borrower’s or debtor’s inability to meet their debt commitments. A borrower may miss payments on a loan or other debt, which could result in a loss of principal or interest. The borrower’s creditworthiness, ability to repay the debt, and the chance of default or payment delay are considered to measure credit risk. Lenders and investors manage credit risk by establishing risk guidelines, diversifying portfolios, and employing risk mitigation techniques.
How to Calculate Credit Value at Risk?
Credit Value at Risk calculator uses Credit Value at Risk = Worst Credit Loss-Expected Credit Loss to calculate the Credit Value at Risk, Credit Value at Risk is the possibility of financial losses for a lender or investment due to a borrower’s or debtor’s inability to meet their debt commitments. Credit Value at Risk is denoted by CR_{v} symbol.
How to calculate Credit Value at Risk using this online calculator? To use this online calculator for Credit Value at Risk, enter Worst Credit Loss (WCL) & Expected Credit Loss (ECL) and hit the calculate button. Here is how the Credit Value at Risk calculation can be explained with given input values -> 12500 = 33000-20500.