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Part I
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Credit Risk
Credit Risk
Easy
Which of the following best describes the difference between expected loss and unexpected loss in credit risk management?
A
Expected loss is the mean of the loss distribution and is covered by loan loss provisions, while unexpected loss measures the volatility around the mean and is covered by economic capital
B
Expected loss is the maximum possible loss, while unexpected loss is the minimum loss
C
Expected loss is calculated using market risk factors, while unexpected loss uses credit factors
D
Both expected and unexpected losses are covered by loan loss provisions
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Tags
#expected-loss
#unexpected-loss
#economic-capital
#provisions
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