Loss-given-default

1. Loss-given-default or LGD is a term used to refer to the loss either expected or incurred following a default on a financial instrument--generally a loan, bond, note or other financial asset evidencing an obligation for borrowed money. A senior secured loan might have an expected LGD of 95% for example. This means that if the loan goes into default, the lender would expect to recover $95 for every $100 of principal amount outstanding.

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