EAD predicts bank's potential loss in borrower default at time of default. Calculated by adding drawn risk to percentage of undrawn risk. Banks calculate EAD for each loan to determine overall default risk. EAD is dynamic and changes as borrower repays lender
Mitigation reduces harmful effects of events or hazards. It's a component of emergency and risk management. Used in criminal law to determine responsibility
Term "black swan" originated from Latin expression about rare birds. First Europeans saw black swans in Australia in 1697. Term later reinterpreted to mean unforeseen and consequential events
SPV is a subsidiary created by parent company to isolate financial risk. Separate company status ensures obligations secure even if parent goes bankrupt. Can be used for risky ventures or debt securitization
VaR predicts maximum possible losses over specific time frames. Used by financial firms to measure and control risk exposure. Determines extent and probabilities of potential portfolio losses
VaR quantifies potential financial losses within firms or portfolios. Used by banks to measure and control risk exposure. Can be applied to specific positions or firm-wide risk