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Unexpected Loss Formula

Thread starter #1
Dear David,

In your credit risk notes (Page 57), LGD has been squared, while determining the UL.
Ditto approach has been followed in the Ong spreadsheet posted.

However, in slides 105 and 108 of credit_a part 2, and also in your video version, LGD has been taken as it is, without squaring.

I am not sure if I have read it right; or, am I missing something?

Please help in clarifying.

Best Regards

David Harper CFA FRM

David Harper CFA FRM
Staff member
Hi Surya

It should be squared. (the notes, the XLS are correct). I noticed the error after recording the video (I thought the PDF slides were corrected. The PDF slides should have it squared). Alas, it is impossible to edit video. I'll post an errata, apologies (although so far there have been few errors).