A bank has booked a loan with total commitment of 600000 of, Ask an Expert

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A bank has booked a loan with total commitment of $600,000 of which 50% is currently outstanding. The default probability of the loan is assumed to be 3% for the next year and loss given default (LGD) is estimated at 40%. The standard deviation of LGD is 30%. Drawdown on default (i.e. the fraction of the undrawn loan) is assumed to be 70%. What are the expected and unexpected losses (standard deviation) for the bank ?

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Financial Management, Finance

Category:- Financial Management
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