You have written a loan and the loan pricing uses a market reference rate (the 90 day bank bill rate) plus a risk adjusted margin. Your loan contract allows you to review the risk adjusted margin every half year (six months). At the last review you spent considerable time and energy estimating the default probability of the firm and the value of the assets pledged as security for the loan. Should you?

a) Assume that nothing has changed in the last six months and not update your calculations.

b) Just add 0.25% to the last risk margin.

c) Assume that only the underlying assets have changed in value and employ a professional valuer to provide an update.

d) Accept the probability of default and asset values are dynamic and redo your calculations with the latest data.