Exposure at Default methodology enhancement and credit portfolio optimization

A fundamental activity of a commercial bank is the lending of capital through various credit instruments such as direct loans to consumers, mortgages, and lines of credit. Efficient lending is at the core of a well functioning economy. The risk in lending is commonly referred to as credit risk and represents the risk of loss due to a borrower’s failure to make payments on debt. It is crucial for a bank to be able to estimate risk of loss from loans as large unexpected losses can result in insolvency or increased costs of borrowing for the public. The research in this proposal aims to estimate some key components of expected loss from retail credit instruments with revolving exposure. In particular, methods to estimate exposure at default (EAD) will be developed and used for credit portfolio management. As our partner organization Bank of Montreal (BMO) offers a significant line of retail credit products the research from this internship would be greatly beneficial for BMO

Faculty Supervisor:

Roy Kwon


Sarthak Garg


Bank of Montreal


Engineering - mechanical



University of Toronto



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