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What does expected loss mean?

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expected loss

The amount of a credit exposure that a creditor can expect to lose in the event of default on a credit exposure equal to the exposure less the value of the collateral in the event of default of the debtor, represented by the formula EL = PD x LGD x EAD, where PD = probability of default, LGD = loss given default and EAD = exposure at default.

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