Risk Glossary

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Economic Capital
Economic capital is the amount of capital the bank needs in the case of loss events, covers all risks across a bank, and is essential for the bank to survive in the long term.
Embedded Options
An embedded option usually provides either the bondholder or the issuer the right to take some action, and include callable bonds and convertible bond.
Employment Practices & Workplace Safety
Employment Practices & Workplace Safety under the Basel II Accord include operational risk events such as discrimination, workers compensation, and employee health and safety.
Endogenous Liquidity
Endogenous liquidity is the liquidity inherent in the banks' assets themselves.
Enterprise Risk Management (ERM)
Enterprise Risk Management is a collection of processes, methods, and other approaches businesses and other organisations use to manage, monitor, and measure risks.
Equity
Equity is the capital raised from shareholders plus retained earnings and reflects the ownership interest in a corporation.
Equity Capital
Equity capital is capital the bank has raised from shareholders and from its earnings.
Equity risk
Equity risk is the potential loss due to an adverse change in the price of stock.
Equity Swap
An equity swap, a financial derivative, where the two counterparties exchange at known future dates cash flows based on the absolute or relative performance of an indvidual equity position, an equity portfolio, or index.
Exchange
A (financial) exchange is a formal, organized physical or electronic marketplace where trades between investors follow standardized procedures.
Exchange rate
Exchange rate is the price of one country's currency expressed in another country's currency, and is the rate at which one currency can be exchanged for another.
Exchange Traded Fund (ETF)
Exchange Traded Fund is a financial instrument that tracks a portfolio, a commodity or an index, and is traded on an exchange.
Execution, Delivery & Process Failures
Execution, Delivery & Process Failures under the Basel II Accord include operational risk events such as data entry errors, accounting errors, failed mandatory reporting, and negligent loss of client assets.
Exogenous Liquidity
Exogenous liquidity (often called funding liquidity) is the liquidity provided to the bank by its liability structure, including its ability to borrow and obtain contingent lines.
Exotic Instrument
An exotic instrument is a financial asset or instrument with features making it more complex than simpler, plain vanilla, products.
Expected Loss (EL)
Expected loss describes the size of losses that can be expected to occur.
Export Credit Agency (ECA)
Export Credit Agency is a private or quasi-governmental institution that acts as an intermediary between national governments and exporters to issue export financing.
Exposure at Default (EAD)
Exposure at default is the maximum loss the lender may suffer in case of a default.
External Credit Assessment Institution (ECAI)
External Credit Assessment Institution provides credit assessment that banking regulators allow banks to use in computing their regulatory capital requirements.
External Data
External data, in terms of operational risk management, relates to operational risk and loss data that is not internal to the organization and is typically accessed through an external database.
External Fraud
External Fraud, in the Basel II Accord, includes operational risk events such as the theft of information, hacking damage, third-party theft and forgery.
External Liquidity
External liquidity is the noncontractual contingent capital supplied by investors and other institutions to support a bank during times of liquidity stress.
External Risk
External risk is associated with a potential loss caused by external parties, is beyond the direct control of the corporation, and includes natural disasters, power shortage or terrorism.

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