What is Loss Given Default?
Loss Given Default The share of an asset that is lost by a lender when a borrower defaults, expressed as a percentage of exposure at default, used in credit risk calculations.
Source: CFA Institute, IFRS Foundation, FASB (GAAP), Basel III Framework
How is “Loss Given Default” Used in Practice?
Loss given default is estimated using historical recovery rates on defaulted loans.
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Who Needs to Know This Term?
- Financial Analysts
- Bankers
- Traders
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What is Loss Given Default?
The share of an asset that is lost by a lender when a borrower defaults, expressed as a percentage of exposure at default, used in credit risk calculations.
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