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

SAP Term: PD

• Component: FS-BA-PM-CR

• Component Name: Credit Risk

• Description: Probability of default Probability that, within a particular time period, a business partner will become insolvent.

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• Key Concepts: 
  PD stands for Probability of Default, which is a measure of the likelihood that a borrower will default on a loan. It is used in Credit Risk Management (CRM) to assess the risk associated with a loan. PD is calculated based on the borrower's credit history, financial situation, and other factors. 
  
  How to use it: 
  In FS-BA-PM-CR Credit Risk Management, PD is used to determine the risk associated with a loan. The higher the PD, the higher the risk of default. This information can be used to decide whether or not to approve a loan and what terms and conditions should be applied. 
  
  Tips & Tricks: 
  When calculating PD, it is important to consider all relevant factors such as the borrower's credit history, financial situation, and other factors. Additionally, it is important to regularly review and update PD calculations as circumstances change. 
  
  Related Information: 
  PD is closely related to other measures of credit risk such as Credit Score and Loss Given Default (LGD). Additionally, PD can be used in conjunction with other measures such as Stress Testing and Capital Adequacy Ratio (CAR) to assess overall credit risk.