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# CALCULATE LOSS RATE

#### Lasberm

##### New Member
Hi,

How could you calculate LR(Loss Rate) from Unexpected Loss formula?

UL= EA X ((PD X stand^2 LR) + (LR^2 x stand^2 PD))^1/2

Many thanks,

Javier

#### Nicole Seaman

##### Director of FRM Operations
Staff member
Subscriber
Hi,

How could you calculate LR(Loss Rate) from Unexpected Loss formula?

UL= EA X ((PD X stand^2 LR) + (LR^2 x stand^2 PD))^1/2

Many thanks,

Javier
Hello @javier,

This has been discussed many times in the forum. We ask that you always search the forum and read through the discussions before posting a new thread, as it is very likely that your question has been answered already. Our search function is here: https://www.bionicturtle.com/forum/search/?type=post and we also have a tag function: https://www.bionicturtle.com/forum/tags/. Here are some threads that came up for me after doing a quick search of "unexpected loss formula" (although there are MANY others):
Here is a helpful post with tips on using the forum also: https://www.bionicturtle.com/utilizing-the-bionic-turtle-frm-forum/

Thank you,

Nicole

#### David Harper CFA FRM

##### David Harper CFA FRM
Staff member
Subscriber
@Lasberm In addition to the references, if you are asking from an exam perspective, then please know that loss rate (aka, LGD) or recovery rate would be supplied: It is notoriously difficult to parameterize. The most common traditional approach is to characterize it with a beta distribution (https://en.wikipedia.org/wiki/Beta_distribution) because the beta is super flexible and bounded by [0,1]. Thanks,

#### Lasberm

##### New Member
Hi David,

The FRM Part I exam (May 19) had a question where you had to calculate LR from UL formula without RR information. How can I calculate LR then?

Many thanks,

Javier

#### David Harper CFA FRM

##### David Harper CFA FRM
Staff member
Subscriber
Hi @Lasberm I am skeptical that an exam question would ask you "to calculate LR from UL;" i.e., given UL, to calculate LR would be very strange. Do you instead mean the question asked you to calculate UL given LR? I can't help without knowing the question ... did you check our feedback thread where many of the (May 2019) exam's questions have been discussed? If you think there was an exam mistake, I will be glad to forward to our contact at GARP, because I have always tried to help if the exam's question's are flawed (and it has happened, to be sure!) cc @Nicole Seaman ... but need more information ... Thanks,