Probability of default and loss given default

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Probability of default and loss given default are important metrics used in credit risk analysis.

Probability of default (PD) is the likelihood of a borrower defaulting on their loan or credit obligation.
Loss given default (LGD) is the amount of money lost by the lender in the event of a borrower default.
PD and LGD are used to calculate expected credit losses (ECL) for financial reporting purposes.
ECL is an estimate of the amount of money a lender expects to lose due to credit defaults over a given period of time.
PD and LGD are influenced by a variety of factors, including borrower creditworthiness, collateral, and economic conditions.

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