LGD (Loss Given Default) Calculator

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Finance

Calculate Loss Given Default (LGD) for credit risk assessment. Measures the percentage of loan lost if borrower defaults, accounting for recovery value. Used in banking credit models and Basel III capital calculations.

Formula

LGD = (Loan Amount - Recovery Value) ÷ Loan Amount × 100%
  • Recovery includes collateral sale proceeds + unsecured recovery
  • Basel III uses LGD in risk weight calculation
  • Typical LGD ranges: 10-50% for secured, 40-100% for unsecured

Mortgage Loss Given Default

Inputs
  • Loan Amount ($): 500000 $
  • Collateral/Recovery Value ($): 300000 $
  • Expected Recovery Rate (%): 60 %

$500k loan, $300k collateral @ 60% recovery = $180k recovered, $320k loss = 64% LGD.

Frequently asked questions

Why does LGD matter?
Higher LGD = higher risk-weighted capital requirement. Banks care about potential loss on defaults.