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While the terms expected loss and unexpected loss are commonly used in risk management, it is important to have a clear understanding of what they actually mean.
In order to understand default risk, we will analyze the its key components: Default arrival, exposure at default, and loss given default.
Default risk can be defined as the risk that the counterparty to a transaction does not honour its obligation. Default could be both in terms on monetary and non-monetary terms, and it's a part of every transaction.
Planning is an important part of doing business. At the outset it may seem time consuming and not entirely useful. Good planning often leads to effective management of resources since everything is taken thought of ahead.
To understand if a product is truly profitable all costs have to be accounted for. Every cost accounted for shows if a profit is made in that product line. More often than not, companies look at making profit through volume sales. This is a fallacy.
