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    Calculates locally in your browser · PD × LGD × EAD
    Banking / provisioning

    Expected loss calculator

    Every credit exposure carries a loss you can price before it happens: probability of default times loss given default times exposure. This calculator computes that expected loss, the loss rate, and the allowance buffer a lender would hold against it.

    PD1.00%LGD40%RatingAcceptable
    Expected loss
    $20,000
    PD × LGD × EAD
    Loss rate
    0.40%
    Of the exposure
    Buffered allowance
    $30,000
    1.5× expected loss
    Exposure
    $5,000,000
    Balance at default
    Loss given default
    The three inputs that produce the allowance.
    $20,000
    Loss given default
    TermValue
    Exposure at default$5,000,000
    Probability of default1.00%
    Loss given default40.0%
    Expected loss$20,000
    Buffered allowance$30,000

    CECL-style single-scenario allowance. Real models use lifetime PD term structures and macroeconomic overlays.

    Inspect the model
    Choose a quick result view, a scaled comparison, or the complete diagnostic set.
    Expected loss against default probability
    Linear in PD: the allowance is only as good as the rating behind it.
    Expected loss against default probability$0$13.4k$26.9k$40.3k$53.8k$67.2k0.0%0.0%0.3%0.3%0.6%0.6%0.9%0.9%1.2%1.2%1.5%1.5%1.8%1.8%2.1%2.1%2.4%2.4%2.7%2.7%3.0%3.0%Loss
    Canonical equations
    The exact relationships implemented by this engine.

    EL = PD × LGD × EAD · The regulatory and accounting building block.

    EL / EAD · PD × LGD, independent of size.

    buffer × EL · Covers estimation error and migration.

    finance methodology

    A clear path from inputs to results.

    Every credit exposure carries a loss you can price before it happens: probability of default times loss given default times exposure. This calculator computes that expected loss, the loss rate, and the allowance buffer a lender would hold against it.

    Step-by-step methodWorked exampleAssumptions explained

    How to use

    1. Enter the exposure at default.
    2. Set the probability of default.
    3. Set the loss given default.
    4. Read the expected loss and the buffered allowance.

    The formula

    EL=PD×LGD×EADEL = PD \times LGD \times EAD

    Reference: Basel/IFRS 9/CECL expected-loss framework.

    Worked example

    $5M exposure, 1% PD, 40% LGD

    Inputs
    • Exposure $5,000,000.
    • PD 1.0%.
    • LGD 40%.
    Calculation path
    1. 1

      Loss rate: 1% × 40% = 0.4%.

    2. 2

      Expected loss: 5,000,000 × 0.004 = $20,000.

    3. 3

      Buffered allowance at 1.5×: $30,000.

    Result

    Expected loss $20,000 · loss rate 0.40% · allowance $30,000.

    Interpreting the result

    Expected loss is a pricing input, not a surprise. The buffer covers estimation error and rating migration; unexpected loss beyond that is what capital is held against.

    Assumptions & limitations

    • Single exposure, single period.
    • PD and LGD are given, not modelled.
    • No discounting to present value.
    • No correlation or portfolio effects.

    Frequently asked questions

    What is LGD?

    One minus the recovery rate on the exposure at default.

    Does it apply to retail loans?

    Yes, with portfolio-level PD and LGD rather than single exposures.

    Is this the same as the allowance?

    Expected loss is the point estimate; the allowance adds a buffer and macro overlays.

    Methodology last reviewed 2026-10-21. Results are informational and not financial or engineering advice — see our disclaimer.