Editing Ai Banking Risk (section)

== <span style="color: #FFFFFF;">Remembering</span> ==
* '''Credit risk''' — The risk that a borrower will default; the most fundamental banking risk.
* '''Probability of Default (PD)''' — The likelihood a borrower defaults over a given time horizon; core input to credit models.
* '''Loss Given Default (LGD)''' — The fraction of exposure lost if a borrower defaults; depends on collateral and recovery.
* '''Exposure at Default (EAD)''' — The expected outstanding balance at time of default.
* '''Expected Credit Loss (ECL)''' — PD × LGD × EAD; the IFRS 9 accounting standard for loan loss provisioning.
* '''Credit scoring''' — Assigning a score to borrowers predicting creditworthiness; FICO score is traditional; ML models extend this.
* '''Market risk''' — The risk of losses from movements in market prices (equity, interest rates, FX, commodities).
* '''Value at Risk (VaR)''' — The maximum loss expected over a period at a given confidence level (e.g., 99% 1-day VaR).
* '''Stress testing''' — Evaluating portfolio loss under extreme (but plausible) market scenarios; required by regulators.
* '''Operational risk''' — Risk of loss from failed processes, people, systems, or external events.
* '''Basel III/IV''' — International banking regulatory framework setting capital requirements and model standards.
* '''SR 11-7''' — Federal Reserve guidance on model risk management; requires independent model validation.
* '''Model risk''' — The risk of adverse outcomes from incorrect or misused models; a regulatory concern for ML in banking.
* '''IFRS 9''' — International accounting standard requiring expected credit loss provisioning for financial instruments.
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