luottorisken
Luottorisken (a Finnish form related to luottoriski, meaning "credit risk") denotes the risk that a borrower or counterparty will fail to meet contractual payment obligations, causing a financial loss for the lender or investor. It is a core concept in banking, corporate finance and fixed-income investing, affecting lending decisions, pricing and capital allocation.
Credit risk is commonly characterized by three quantitative components: probability of default (PD), loss given default
Management of luottorisken involves assessment, mitigation and monitoring. Typical tools are credit analysis and scoring, covenants,
Credit risk can be idiosyncratic (borrower-specific) or systemic (related to broader economic cycles). Effective risk management