A practically oriented, top-down approach to assessing the quality of EL by backtesting with a properly defined risk … measure is introduced. In a first step, the concept of risk expenses ("Cost of Risk") has to be extended beyond the classical … provisioning view, toward a more adequate capital consumption approach ("Impact of Risk"). On this basis, the difference between …

The aggregation of individual risks into total risk using a weighting variable multiplied by two ratio variables … representing incidence and intensity is an important task for risk professionals. For example, expected loss (EL) of a loan is the …