This lesson is free - just sign in to access it.
This lesson is a part of the course Credit Risk Management
There are several factors that determine how credit limits and provisions are set. The limit could be a notional amount against which an individual counterparty’s exposure is restricted within. Therefore, there will be a total exposure that should not exceed that notional amount.
Expected loss is another variable that can be used to set limits. If the party experiences a loss then the credit line is withdrawn.
