What is coefficient of determination R² in SAP FS-BA-PM-CR - Credit Risk?

SAP Term: coefficient of determination R²

• Component: FS-BA-PM-CR

• Component Name: Credit Risk

• Description: A measurement for the explained variance using all factors assigned to the weighting types "Country" or "Industry Sector" systematic factors. This is used for a given counterparty in the correlation model for credit portfolio data processing.

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• Key Concepts: 
  Coefficient of determination R² is a statistical measure used to assess the accuracy of a model. It is calculated by taking the ratio of the variance of the predicted values to the variance of the actual values. The coefficient of determination R² ranges from 0 to 1, with 1 indicating a perfect fit. 
  
  How to use it: 
  In SAP FS-BA-PM-CR Credit Risk Management, coefficient of determination R² is used to assess the accuracy of credit risk models. It is calculated by taking the ratio of the variance of the predicted values to the variance of the actual values. The higher the coefficient of determination R², the better the model fits the data. 
  
  Tips & Tricks: 
  When using coefficient of determination R² in SAP FS-BA-PM-CR Credit Risk Management, it is important to remember that a higher coefficient indicates a better fit. However, it is also important to consider other factors such as accuracy and precision when assessing a model's performance. 
  
  Related Information: 
  For more information on coefficient of determination R² and its use in SAP FS-BA-PM-CR Credit Risk Management, please refer to SAP's official documentation on credit risk management.