Portfolio Loss Allowance

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Definition

The portfolio loss allowance is the sum of individual credit asset loss allowances:

\mbox{PLA}_{t,T} = \sum_{i}^{N} \left ( 1_{ \{ S_t^{i} = 1 \} } \mbox{ECL}^{i}_{t,12m} + 1_{ \{ S^{i}_t = 2 \} } \mbox{ECL}_{t,T_i}^{i} + 1_{ \{ S^{i}_t = 3 \} } \mbox{EAD}_{t}^{i} \, \mbox{LGD}_{t}^{i} \right )

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