
The application calculates economic capital based on probability of default (PD) and loss given default (LGD) probabilities, along with PD and LGD cycle migration stress, and correlations. Projected portfolio growth can be included in the economic capital calculation.
The application summarizes economic capital requirements at differing loss percentiles, and quantifies the capital requirements at the portfolio level, sub-portfolio level, and individual loan and customer exposures. Loans and customers requiring a high amount of economic capital are quickly identified. The application calculates both allowance for loss and economic capital.
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