IFoA SP10 Practice Questions - IFoA SP10 Banking Specialist Principles Exam

Which definition best describes Loss Given Default (LGD) in a credit-risk model?

The probability the obligor defaults within one year The total amount owed at the moment of default The discount rate applied to recovered cash flows The proportion of the exposure that is lost if default occurs, net of recoveries

Correct Answer:

The proportion of the exposure that is lost if default occurs, net of recoveries

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