Loss Given Default (LGD) Calculator

Loss Given Default (LGD) Calculator - Calculate loss given default based on expected exposure and recovery rate to determine the severity of a potential loss.

Loss Given Default Formula

$6600 * ( 23% / 100 ) = $1518.John's company had an expected loss given default of $1,518. This was calculated by multiplying the expected exposure of $6,600 by the loss severity of 23%. This means that if John's company defaults on its loan, it can expect to lose approximately $1,518 per unit of exposure.

Loss Severity Formula

( 1 - ( 15% / 100 ) ) * 100 = 85%. Sarah's loss severity is 85%, meaning that only 15% of the original value is recoverable, resulting in a substantial loss. The high loss severity indicates that a large portion of the value cannot be recouped.

Meaning

The Loss Given Default (LGD) is a measure used to estimate the expected loss from a defaulting loan. It represents the percentage of the original loan amount that would be recovered if a borrower defaults on their payments. In other words, it indicates the proportion of the loan balance that is considered recoverable after a borrower has defaulted.