PRMIA CCRM Practice Questions - PRMIA Credit And Counterparty Risk Management Certificate Exam

Which formula correctly defines Expected Loss (EL) under the standard credit risk framework used by PRMIA and Basel?

EL = PD + LGD + EAD EL = PD x LGD x EAD EL = PD x (1 - LGD) x EAD EL = EAD x (1 + LGD) / PD

Correct Answer:

EL = PD x LGD x EAD

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