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The configuration is organised in setsset of rules. A set helps to determine, at a later point in time, which parameter and which characteristics were relevant for segmentation at the time when ECL calculation was performed.
A set contains the parameters and values for segmentation and can be used in a master scenario. Several sets can be maintained next to each other in parallel. For each master scenario, however, only one set can be assigned and is therefore valid. Different parallel master scenarios can take different sets into account.(For details on what needs to be considered during segment definition and how to configure segments, please read more in the manual: Segmentation.).
As the segmentation groups individual deals that carry similar credit risk characteristics, it is necessary to consider this segmentation while
- selecting and applying the appropriate ECL model including PD, LGD and EAD as well as
- considering the historical default information that is linked to the segment.
For example: if a segment "retail loans" and a segment "corporate loans" are considered during ECL calculation, segment-specific historical default information should be used for the calculation of PD and LGD.
On the basis of the combination of segment and stage, the appropriate parameters for ECL calculation can be identified, taking the availability and relevance of performance data into account. For details about stage assignment, please refer to Stage Assignment.