Estimate loss on a loan if the borrower defaults.
Please do not make financial decisions based on these results.
What is the LGD Calculator – Loss Given Default?
Estimate loss on a loan if the borrower defaults. To use the LGD Calculator – Loss Given Default, enter exposure at default, recovery value, probability of default; it returns loss given default, loss in dollars, expected loss, and shows them instantly as you type.
Where the LGD Calculator – Loss Given Default fits
Estimate loss on a loan if the borrower defaults. The main figure it returns is the Loss given default, worked out from the values you enter.
It belongs with the other bonds & credit ratios tools. If you are comparing options or checking a result from another angle, try the Altman Z-Score Calculator, Yield to Call Calculator or the Effective Duration Calculator.
How to use the LGD Calculator – Loss Given Default
- Fill in the fields. You will need Exposure at default ($), Recovery value ($), Probability of default (%). Take the price, coupon and maturity from the bond’s listing. Fields marked optional can stay at zero.
- Read the result. The highlighted box gives the Loss given default, and the cards below show Loss in dollars, Expected loss. Tables and charts break it down further.
- Test other scenarios. Results update as you type. Change one value at a time to see what drives the answer, and press Reset to go back to the defaults.
Formula and how it works
Example with real numbers
Here is the LGD Calculator – Loss Given Default using the default values shown in the calculator above:
Inputs
| Exposure at default ($) | 500,000 |
|---|---|
| Recovery value ($) | 320,000 |
| Probability of default (%) | 2 |
Results
| Loss given default | 36% |
|---|---|
| Loss in dollars | $180,000.00 |
| Expected loss | $3,600.00 |
With these inputs the calculator returns Loss given default: 36%. Change any value in the calculator to see how the result moves.
What if you change one input?
Sensitivity check: raising Exposure at default ($) from 500,000 to 600,000 (about 20% higher) and leaving everything else as in the example above changes the results like this:
| Result | Example | After the change | Change |
|---|---|---|---|
| Loss given default | 36% | 46.67% | +29.6% |
| Loss in dollars | $180,000.00 | $280,000.00 | +55.6% |
| Expected loss | $3,600.00 | $5,600.00 | +55.6% |
The input that moves the result most is the one to check twice. Change it in the calculator above to test your own case.
What the results tell you
The results panel of the LGD Calculator – Loss Given Default reports Loss given default, loss in dollars and expected loss. Compare these figures while changing one input at a time, and use the related calculators below to look at the same situation from another angle.
Method and limits. This calculator applies the formula in the section above to your inputs, in your browser; nothing you enter is stored on our servers. The result is only as accurate as the numbers you enter and the formula shown above. It is for information, not financial, tax or legal advice.
Frequently asked questions
What is exposure at default?
The amount you are owed at the moment of default.
What do solvency ratios tell me?
Ratios such as debt to equity, interest coverage and the Altman Z-score show how safely a company can meet its debts.
Why do bond prices fall when rates rise?
New bonds pay the higher rate, so older, lower-coupon bonds must sell at a discount to match the market yield.
Are the results guaranteed?
No. Results depend entirely on the numbers you enter and the formulas shown on this page. Please do not make financial decisions based on them alone; confirm important figures with a licensed professional.
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