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Question · Measuring expected credit losses

Mer SA must estimate the expected credit loss of a portfolio of corporate loans. Facts of the case: three economic scenarios (stable, slowdown, recession) have been built, with probabilities and losses per scenario; management is considering retaining only the slowdown scenario, judged the most likely, to simplify the calculation. Write a short note that concludes on the estimation method, distinguishing the facts of the case, the rule and professional judgement.

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Judgment question: compare your answer with the criteria and the model explanation.

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