What is loss given default in SAP IS-B-RA-CL - Default Risk and Limit System?

SAP Term: loss given default

• Component: IS-B-RA-CL

• Component Name: Default Risk and Limit System

• Description: Amount of the loss in the event of the borrower's default. LGD = 1-RR RR = recovery rate

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• Key Concepts: 
  Loss Given Default (LGD) is a measure of the expected loss on a loan or other financial instrument if the borrower defaults. It is expressed as a percentage of the total amount of the loan or instrument. In the context of SAP's IS-B-RA-CL Default Risk and Limit System, LGD is used to calculate the expected losses associated with a particular loan or instrument. 
  
  How to use it: 
  In order to use LGD in SAP's IS-B-RA-CL Default Risk and Limit System, users must first define the LGD for each loan or instrument. This can be done by entering the expected loss percentage into the system. Once this is done, the system will then calculate the expected losses associated with each loan or instrument based on this LGD value. 
  
  Tips & Tricks: 
  When defining LGD values in SAP's IS-B-RA-CL Default Risk and Limit System, it is important to ensure that the values are accurate and up to date. This will ensure that the system is able to accurately calculate expected losses associated with each loan or instrument. 
  
  Related Information: 
  For more information about Loss Given Default (LGD) and how it is used in SAP's IS-B-RA-CL Default Risk and Limit System, please refer to SAP's documentation on the topic.