Credit Transaction and Credit Risk Created

Credit TypeLosses Result FromLoss Type
Loaned MoneyNon-RepaymentFace Amount
Slow RepaymentTime Value of Money
Dispute/EnforcementFrictional Costs
Lease ObligationNon-PaymentRecovery of Asset, Re-marketing Costs, Difference in conditions
ReceivablesNon-Payment of goods delivered or service performedFace Amount
Prepayment for Goods or ServicesNon-DeliveryReplacement Cost
Performance on delivery not as contractedIncremental Operating Cost
Slow DeliveryTime Value of Money
Dispute/EnforcementFrictional Costs
DepositsNon-RepaymentFace Amount
Slow Re-PaymentTime Value of Money
Claim or Contingent Claim on AssetNon-RepaymentFace Amount
Slow Re-paymentTime Value of Money
Dispute/EnforcementFrictional Costs
DerivativeDefault of Third PartyReplacement Cost (Based on MTM)
Excerpt From: Sylvain Bouteillé. “The Handbook of Credit Risk Management: Originating, Assessing, and Managing Credit Exposures.”