Expected Loss
Combines default likelihood, loss severity and exposure into an expected credit loss measure.
Formula
Variables: PD probability of default; LGD loss given default; EAD exposure at default
What it means
Combines default likelihood, loss severity and exposure into an expected credit loss measure.
Example
PD 2%, LGD 40% and EAD 1m imply an expected loss of 8,000 under the simple one-period formulation.
How to interpret it
This concept should be read together with its market convention, measurement horizon and underlying instrument. BondStats presents it as an analytical reference rather than investment advice; instrument documentation and primary market rules remain authoritative.
Related Formulas
BondStats reference content is independently written. Mathematical relationships, abbreviations and market conventions are presented for educational and analytical use.