![]() ![]() In the above example shown in LGD, outstanding balance of $100,000 is EAD ![]() Exposure at Default (EAD) is the amount that the borrower has to pay the bank at the time of default.Bank took possession of flat and was able to sell it for $90,000. When he defaults, loan has an outstanding balance of $100,000. He/She paid some installments before he stopped paying installments further. For example someone takes $200,000 loan from bank for purchase of flat. Loss Given Default (LGD) is a proportion of the total exposure when borrower defaults.Probability of Default (PD) tells us the likelihood that a borrower will default on the debt (loan or credit card). In simple words, it returns the expected probability of customers fail to repay the loan.During the process, its role is to work for bank in compliance to central bank regulations. In banking world, credit risk is a critical business vertical which makes sure that bank has sufficient capital to protect depositors from credit, market and operational risks. This tutorial outlines several free publicly available datasets which can be used for credit risk modeling.
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