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In this article, Michael Winands shows how a loan’s lifetime expected credit loss can be approximated when the underlying credit rating or collateralisation is altered, allowing it to be calculated over the Cartesian product of sets of ratings and collateralisations in a feasible amount of time. Hence, the expected value of a future provision (the forecast of a provision) can be determined with reasonable effort.

Since the financial crisis of 2007–8, stress