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

SAP Term: weighting vector

• Component: FS-BA-PM-CR

• Component Name: Credit Risk

• Description: A vector containing the weighting factors for the relevant sectors, in which the weighting factors across all sectors add up to 1.

Smart SAP Assistant

• Key Concepts: 
  Weighting vector is a concept used in the FS-BA-PM-CR Credit Risk Management component of SAP. It is a mathematical tool used to assign weights to different factors in order to measure the risk associated with a particular credit transaction. The weighting vector is used to calculate the probability of default (PD) for a given credit transaction. 
  
  How to use it: 
  The weighting vector is used to assign weights to different factors that are used to measure the risk associated with a particular credit transaction. The factors can include the borrower’s credit score, the amount of the loan, the length of the loan, and other factors. The weights are then used to calculate the probability of default (PD) for the given credit transaction. 
  
  Tips & Tricks: 
  When using the weighting vector, it is important to consider all relevant factors when assigning weights. This will ensure that the PD calculation is accurate and reflects the true risk associated with the credit transaction. Additionally, it is important to regularly review and update the weighting vector as market conditions change in order to ensure that it remains accurate and up-to-date. 
  
  Related Information: 
  The weighting vector is closely related to other concepts such as credit scoring and loss given default (LGD). Credit scoring is used to assess a borrower’s creditworthiness, while LGD is used to measure the expected losses associated with a particular credit transaction. Both of these concepts are important components of credit risk management and should be taken into consideration when using the weighting vector.