The expected return of a loan suitable for default risk. If p = probability of repayment, then 1-p = probability of default. The expected non-repayment, and [loan amount * (1-p)] is an expected loss (EL) in provisions for loan losses (contra-asset account) are covered. A "cost of doing business." E (k) and (p) are not independent: higher k implies riskier loans and higher than expected level. As (k) and (p) are strongly negatively correlated, beyond a certain point, higher contractBack to correspond to lower expected returns.
Keywords: Credit, risk, loan, default
