The simple link from default to LGD

Jon Frye
14 Feb 2014

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Every credit portfolio produces default rates and loss given default (LGD) rates. If the two rates respond to the same conditions then risk is greater, and this affects loan pricing, portfolio optimisation and capital attribution. Any model containing a default rate and an LGD rate must account for their co-movement.

The simple link from default to LGD

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