Exposure At Default - How EAD Is Calculated

How EAD Is Calculated

Calculation of EAD is different under foundation and advanced approach. While under foundation approach (F-IRB) calculation of EAD is guided by the regulators, under the advanced approach (A-IRB) banks enjoy greater flexibility on how they calculate EAD.

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Exposure At Default - How EAD Is Calculated - Calculating EAD Under Advanced Approach
... Under A-IRB, the bank itself determines the appropriate EAD to be applied to each exposure ... A bank using internal EAD estimates for capital purposes might be able to differentiate EAD values on the basis of a wider set of transaction characteristics (e.g ... All estimates of EAD should be calculated net of any specific provisions a bank may have raised against an exposure ...

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