loss given default


LGD. The actual total loss that is experienced by a bank when a debtor defaults on a loan from that bank. The loss given default is not always equal to the total amount of the loan; for example, if the debtor pledged collateral against the loan, the bank could receive these assets, and their total loss would not be greater than the amount of the loan minus the value of the assets.

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The loss given default gives the most accurate picture of how well prepared the bank was for a possible default.

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You should try and do your best to avoid having a high loss given default but must be able to accept it if it happens.

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When the farmer defaulted on his loan, the loss given default was in favor of the bank, as they not only received a partial repayment of his loan, but also his farm as collateral which was greater than the initial loan itself.

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loss control exposure at default