Drawdown Risk

From Open Risk Manual

Definition

Drawdown Risk is the risk that clients with credit line type of products will draw on these at amounts different than those expected either due to their individual or due to market circumstances.

Context

It is a form of Optionality Risk because the ability to draw down additional funds (typically up to a limit) is part of contractual specification of the product. Drawdown Risk affects the Expected Life of an instrument, which is an important consideration among others in the context of IFRS 9

See Also

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