What is effective number of exposures in SAP FS-BA-PM-CR - Credit Risk?

SAP Term: effective number of exposures

• Component: FS-BA-PM-CR

• Component Name: Credit Risk

• Description: Effective number of exposures in a securitization pool.

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• Key Concepts: 
  Effective number of exposures is a term used in the Credit Risk Management component of SAP Financial Services. It is a measure of the total number of exposures that a financial institution has, taking into account the size and risk profile of each exposure. This measure is used to assess the overall risk of a portfolio and to determine the amount of capital that should be allocated to cover potential losses. 
  
  How to use it: 
  The effective number of exposures can be calculated by summing up the individual exposures in a portfolio and then dividing by the total risk-weighted exposure. This calculation can be done manually or with the help of an automated system such as SAP Financial Services. Once the effective number of exposures has been calculated, it can be used to assess the overall risk of a portfolio and to determine the amount of capital that should be allocated to cover potential losses. 
  
  Tips & Tricks: 
  When calculating the effective number of exposures, it is important to consider not only the size and risk profile of each exposure, but also any other factors that may affect the overall risk of a portfolio. For example, if there are multiple exposures with similar characteristics, it may be beneficial to group them together in order to reduce the effective number of exposures. 
  
  Related Information: 
  The effective number of exposures is closely related to other measures such as Value at Risk (VaR) and Expected Shortfall (ES). These measures are used to assess the potential losses associated with a portfolio and can help financial institutions manage their risk more effectively.