Credit risk is the potential for a loss when a borrower cannot make payments as obligated to a lender. Credit risk is commonly measured and communicated as the likelihood or probability of an individual borrower’s default. Most lenders employ sophisticated models to analyze risk, rank customers, and decide on appropriate strategies for managing this risk.
Effective techniques for managing and analyzing risk include:
See also: Risk Management Toolbox, Statistics and Machine Learning Toolbox, Financial Toolbox, risk management, Monte Carlo simulation, counterparty credit risk, credit derivatives, credit scoring model, IFRS 9