SN Schroeder chapter 5, pg 6

[JC5]

I am not sure if this has been already discussed.

1. = 1,000,000 ∗ √0.05 ∗ 0.03 + 0.10 ∗ 0.08 = US$ 97,467
   
   Shouldn't .10 be .1o^2? The LR or LGD in the UL formula is squared. This would result in an UL of $47,958.

 

[ShaktiRathore]

Yes Lgd is squared and edf is not squared in the ul formula
UL=AE*sqrt(EDF*sigma(LGD)^2+LGD^2*sigma(EDF)^2)
Thanks