Explanation of the Risk-Weight Functions
Effective from Dec 28 2022 - Dec 31 2022
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| 11.2 | Regarding the risk-weight functions for deriving risk weighted assets set out in this chapter: | |
| (1) | Probability of default (PD) and loss-given-default (LGD) are measured as decimals | |
| (2) | Exposure at default (EAD) is measured as currency (e.g. SAR), except where explicitly noted otherwise | |
| (3) | ln denotes the natural logarithm | |
| (4) | N(x) denotes the cumulative distribution function for a standard normal random variable (i.e. the probability that a normal random variable with mean zero and variance of one is less than or equal to x). The normal cumulative distribution function is, for example, available in Excel as the function NORMSDIST. | |
| (5) | G(z) denotes the inverse cumulative distribution function for a standard normal random variable (i.e. the value of x such that N(x) = z). The inverse of the normal cumulative distribution function is, for example, available in Excelas the function NORMSINV. | |