Expected Loss Calculator

Calculator Inputs

Use the fields below to estimate expected credit loss for a single exposure or an aggregated loan segment.

Portfolio Name

Currency

Number of Accounts

Probability of Default (%)

Exposure at Default

Recovery Rate (%)

Discount Rate (%)

Time Horizon (Months)

Scenario Multiplier

Stress Correlation Factor (%)

Collection Cost

Provision Coverage (%)

Tip: Scenario Multiplier and Stress Correlation Factor let you simulate downturn conditions without changing the core portfolio assumptions.

Formula Used

The core expected loss model is:

Expected Loss = Probability of Default × Exposure at Default × Loss Given Default

Where Loss Given Default = 1 − Recovery Rate.

This page extends the standard model with scenario stress, collection costs, discounting, and provision coverage so the final result is more useful for planning and reporting.

Component	Explanation
PD	The chance that the borrower defaults during the selected horizon.
EAD	The amount outstanding when default occurs.
LGD	The portion not recovered after default.
Stressed PD	Base PD adjusted by scenario and stress correlation.
Discount Factor	Present value factor applied over the selected horizon.
Provision	Total expected loss multiplied by coverage percentage.

How to Use This Calculator

Enter a portfolio name, reporting currency, and account count.
Input base Probability of Default, Exposure at Default, and Recovery Rate.
Add discount rate and time horizon if you want present value treatment.
Use scenario multiplier and stress correlation to test tougher conditions.
Add collection cost and provision coverage to align with reporting needs.
Press calculate. The result section will appear above the form and under the page header.

Example Data Table

Portfolio	PD %	EAD	Recovery %	Scenario Multiplier	Discount %
SME Working Capital	3.80	2,500,000	42.00	1.20	7.00
Mortgage Segment A	1.60	5,800,000	68.00	1.05	6.25
Credit Card Roll Rate	6.90	1,150,000	18.00	1.35	9.50
Commercial Leasing	2.75	3,300,000	47.00	1.10	7.80

Frequently Asked Questions

1. What does expected loss measure?

It estimates the average credit loss you should expect over a period. It combines default likelihood, exposure size, and the portion unlikely to be recovered.

2. Why is recovery rate important?

Recovery rate directly reduces loss given default. Higher recoveries lower expected loss, while weaker recoveries increase reserve pressure and pricing requirements.

3. What is the difference between PD and stressed PD?

Base PD reflects normal expectations. Stressed PD adjusts that rate with scenario and stress assumptions to show how loss may rise during adverse conditions.

4. Why does the calculator include discounting?

Discounting converts future expected losses into present value terms. This helps when your policy, accounting framework, or pricing model requires time value treatment.

5. Can I use this for a whole portfolio?

Yes. You can enter aggregated exposure and account counts for a segment or portfolio. Results are especially useful for planning, trend comparison, and scenario testing.

6. What does provision coverage do?

Provision coverage applies a chosen reserve percentage to total expected loss. It helps align the result with internal policy or external reporting targets.

7. What is the unexpected loss proxy?

It is a simplified volatility-style indicator derived from stressed PD, exposure, and LGD. It is useful for comparison, not a replacement for formal capital models.

8. Can I export the results?

Yes. After calculation, use the CSV or PDF buttons in the results section. They export the summary values displayed on the page.