Credit Risk - Regulatory & Economic Capital: Solved Example (FRM Part 1, Valuation and Risk Models)

[@anubhavpratik2767]

Question: Could you please let me know is economic capital is always greater than regulatory capital in all scenarios ?

[@haythemtilouch1191]

Question: What is the diffrence between the calculation the economic capital and the IRB Risk weight function ? and btw your one of the best teacher i've encontered in youtube thank so much for your videos !

[@finRGB]

A firm calculates economic capital to size up its buffers meant to absorb losses owing to various risk types (market, operational, credit etc.). It's an internal calculation aimed to have enough capital to limit the probability of financial distress (this probability can be picked based on the firm's target credit rating). Internal Ratings Based (IRB) approach is meant to calculate RWA that are specific to credit risk. It comes as part of Basel II / Basel III, for calculation of regulatory capital.

[@PRATIKBARVEPGP-Batch]

It would be great if you can have chapter wise lectures, for eg, inb this chapter I am having difficulty in understanding the single factor model etc

[@finRGB]

Hi Pratik, thank you for the feedback. The videos in the FRM preparation course are recorded on a per Learning Objective (LO) basis (as per LOs in GARP Study Guide). The aim is to post those videos on KZbin that can do justice to a concept on a standalone basis, but at times, reference(s) to terms that were covered in preceding videos in the course becomes unavoidable.

[@chubbyeze732]

X. I'm u