SAARC FINANCE,
REGIONAL SEMINAR, ISLAMABAD
38
EaD Model: k-factors for other uncertain exposures
The Fixed Horizon Method
DD-12
DD
0
X
Y
Z
Outstanding at
DD
Outstanding at
DD-12
Committed Limit
K-factor = Amount Subsequently Drawn /
Undrawn Amount = (Y-X) / (Z-X)
§The k-factor
reflects the percentage of “headroom” (defined as unutilized limit)
that is expected to have been
drawn down by a customer at the point of default should that customer default
at any point within the next
12 months.
Headroom = Limit – Outstanding at
DD-12