This lesson is free - just sign in to access it.
This lesson is a part of the course Credit Risk Management
Ask questions about this lesson and get instant answers.
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 If the party experiences a loss then the credit line is withdrawn.
