Sep 20

Unexpected loss (UL) of credit asset – 9 min screencast

by David Harper, CFA, FRM, CIPM

A review of Michael Ong’s unexpected loss (UL) for a single credit-asset. First, I briefly compare the various definitions of unexpected loss we encounter in the FRM; they are not so different. Ong’s UL is a single standard deviation (i.e., low confidence) while economic and regulatory capital (reflecting high confidence levels) are some multiple of Ong’s UL. In short, all these parametric approaches are dispersion around an asymmetric distribution, the difference is the desired (or implied) confidence: