Finance English
Banking

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.

Certification Exam Relevance

CFAACCAFRM

Who Needs to Know This Term?

  • Financial Analysts
  • Bankers
  • Traders

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Frequently Asked Questions

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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