Expected Loss is the bridge between rating and decision.
PD comes from Phase 1. LGD captures collateral and recovery. EAD is what the borrower will likely owe at default. Outstanding plus drawdown.
Multiply the three. The number is what to price for, provision against, and steer the portfolio away from.
Five activities. Three inputs in. One loss expectation out, per facility, per portfolio, per IFRS 9 stage.
One-year PD per grade. Calibrated annually.
Net of collateral, recovery experience, workout cost.
Outstanding plus credit conversion factor on undrawn.
EL per facility. Aggregate to portfolio.
IFRS 9 staging. 12-month vs lifetime EL.
Set the PD from a rating grade, the LGD from a collateral class, the EAD from the facility size. The calculator runs the EL line and shows the IFRS 9 stage. Move the rating up or down a notch and watch the loss expectation respond.
The arithmetic of credit loss made transparent. Enter the rating-driven PD, the collateral-driven LGD, and the facility-driven EAD. The calculator returns expected loss in absolute and percentage terms, identifies the IFRS 9 stage, and frames the figure as either a 12-month or lifetime expectation. Built for credit teams that want the math defensible at audit.
Launch the calculator →Phase 2 instruments make the loss arithmetic visible and traceable. Every input has a source, every output has a downstream use.
One-year and lifetime PD curves per rating grade. Calibrated annually against realised defaults. Source for the PD input in the EL calculation and for IFRS 9 staging logic.
View the toolLGD estimates by collateral class, sector, and recovery experience. Adjusted for workout cost and time-to-recovery. Updated as new recovery cases close.
View the toolExposure at default including undrawn commitments at the appropriate Credit Conversion Factor. Handles revolving, term, and contingent facilities consistently.
View the toolThe arithmetic engine. EL per facility, EL per portfolio cut, sensitivity to PD shifts. Output feeds Phase 3 pricing, provisioning, and capital allocation.
View the toolStage 1 (12-month EL), Stage 2 (lifetime EL on significant increase in credit risk), Stage 3 (lifetime EL on impaired). Documented triggers, audit-ready trail.
View the toolExpected loss is what makes pricing honest. When PD, LGD, and EAD reach the deal table instead of a model room, the relationship manager, credit, and pricing all reason from the same number. Margin stops being an opinion.
Christian Ruehmer, Co-Founder, Q-Lana
Two places Expected Loss shows up next.
Full method behind PD, LGD, EAD calibration. IFRS 9 staging logic. The link from EL to provisioning, capital, and the Risk Appetite Statement.
The training program from which the EL Calculator on this page is drawn. Covers PD calibration, LGD estimation, EAD treatment, and validation.
Expected Loss is what makes risk pricing honest. Without it, every facility is priced to a margin without reference to its underlying risk. With it, the institution prices to risk, provisions to risk, and allocates capital to risk. The discipline that one line of math imposes is the difference between an ad-hoc credit book and one that scales without surprises.
Thirty minutes. We compare your PD, LGD, and EAD wiring against what we have built and recalibrated across more than a hundred portfolios.
Curated news with practitioner commentary. One Deep Dive in rotation. One applied tool. Read in fifteen minutes. Used the same week.