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PORTFOLIO CREDIT RISK
What is portfolio credit risk?
Portfolio credit risk refers to the risk of loss arising from simultaneous defaults or credit quality deterioration across multiple obligors in a loan or investment portfolio, considering the correlation between individual credit exposures.
What is systematic risk in the context of portfolio credit risk?
Risk affecting all borrowers simultaneously due to common factors.
What is credit concentration risk in a banking portfolio?
Credit concentration risk is the risk arising from excessive exposure to a single borrower, sector, geography, or product, where adverse events affecting that concentrated area can cause disproportionate losses to the bank.
What is idiosyncratic risk in a credit portfolio?
Borrower-specific risk that can be diversified away.
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