Expected Loss

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Credit risk evaluation - banking.

(EL).

Expected Loss is a regulatory calculation of the amount expected to be lost on a credit risk exposure within a 12-month timeframe.

It is calculated as:

EL = PD x EAD x LGD


Where:

EL = expected loss

PD = probability of default %

EAD = exposure at default

LGD = loss given default %


See also