What is K-dilution in SAP FS-BA-PM-CR - Credit Risk?

SAP Term: K-dilution

• Component: FS-BA-PM-CR

• Component Name: Credit Risk

• Description: Capital requirement for dilution before the application of credit risk mitigation techniques.

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• Key Concepts: 
  K-dilution is a term used in the SAP Credit Risk Management (FS-BA-PM-CR) component. It is a measure of the risk of a loan or other credit instrument being repaid with funds from a new source, such as a new loan or other credit instrument. K-dilution is calculated by dividing the amount of the new loan or other credit instrument by the total amount of the existing loan or other credit instrument. 
  
  How to use it: 
  K-dilution can be used to assess the risk of a loan or other credit instrument being repaid with funds from a new source. It can also be used to compare different loans or other credit instruments and determine which one has the lowest risk of being repaid with funds from a new source. 
  
  Tips & Tricks: 
  When calculating K-dilution, it is important to consider the terms and conditions of the new loan or other credit instrument, as well as any potential changes in interest rates or other factors that could affect repayment. Additionally, it is important to consider any potential tax implications associated with taking out a new loan or other credit instrument. 
  
  Related Information: 
  K-dilution is related to other measures of risk, such as credit scoring and debt service coverage ratio (DSCR). Credit scoring is used to assess an individual’s ability to repay a loan or other credit instrument, while DSCR measures an individual’s ability to repay debt based on their income and expenses.