Given anonymized loan data containing PD, LGD, and EAD, compute portfolio expected loss (EL) and risk‑weighted assets (RWA). State assumptions, formulas, aggregation approach, treatment of off‑balance‑sheet exposures, and any sensitivity checks.

This question evaluates credit risk quantification and regulatory capital competencies, specifically the ability to use loan-level PD, LGD and EAD inputs to derive portfolio expected loss and risk-weighted assets.

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This is a medium difficulty Machine Learning question, commonly asked during Technical Screen rounds at Citibank.

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This question is commonly asked for Data Scientist candidates at Citibank during technical interviews.

Compute EL and RWA from loan data | Citibank Interview Question

Task: Compute Portfolio EL and RWA from Loan-Level PD, LGD, EAD

Context

You are given an anonymized, loan-level dataset with at least the following fields per exposure:

PD: one-year probability of default (as a decimal, e.g., 0.01 for 1%)
LGD: loss given default under downturn conditions (decimal between 0 and 1)
EAD: exposure at default (currency units). For off-balance-sheet items, EAD should reflect credit conversion factors (CCFs), or you must compute EAD from committed/undrawn amounts and CCFs.

Compute:

Portfolio expected loss (EL)
Risk-weighted assets (RWA)

Also state:

Assumptions (regulatory approach, asset class, maturity, parameter floors)
Formulas used
Aggregation approach across loans
Treatment of off-balance-sheet exposures
Sensitivity and validation checks

Task: Compute Portfolio EL and RWA from Loan-Level PD, LGD, EAD

Context

You are given an anonymized, loan-level dataset with at least the following fields per exposure:

PD: one-year probability of default (as a decimal, e.g., 0.01 for 1%)
LGD: loss given default under downturn conditions (decimal between 0 and 1)
EAD: exposure at default (currency units). For off-balance-sheet items, EAD should reflect credit conversion factors (CCFs), or you must compute EAD from committed/undrawn amounts and CCFs.

Compute:

Portfolio expected loss (EL)
Risk-weighted assets (RWA)

Also state:

Assumptions (regulatory approach, asset class, maturity, parameter floors)
Formulas used
Aggregation approach across loans
Treatment of off-balance-sheet exposures
Sensitivity and validation checks

Compute EL and RWA from loan data

Quick Overview

Task: Compute Portfolio EL and RWA from Loan-Level PD, LGD, EAD

Context

Solution

Comments (0)

Compute EL and RWA from loan data

Quick Overview

Task: Compute Portfolio EL and RWA from Loan-Level PD, LGD, EAD

Context

Solution

Comments (0)