Work out loss given default instantly with clear inputs, formula shown and shareable results.
Loss given default is one minus the net recovery rate, where recoveries must be discounted back to the default date and reduced by legal and enforcement costs. Slow recoveries are worth much less than their nominal amount.
Loss given default
LGD = 1 - (PV of recoveries - recovery costs) / exposure at default
Figures are estimates based on the inputs given. Bank charges, regulatory minima and market rates change and differ between institutions and jurisdictions. This is not financial advice — confirm with your bank or treasury policy.
Because money recovered after two years of litigation is worth materially less than immediate cash.
Collateral quality and enforceability. Secured lending against liquid collateral can recover almost everything.