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Default Recovery & Loss Amount Calculator

Apply a recovery-rate assumption to an exposure amount.

  • Formula & worked example
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Calculator inputs

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How to use this calculator

  1. Enter the known values in the units shown. Results update as you type.
  2. Edit a calculated value to solve backwards, or lock a value to hold it fixed.
  3. Use the worked example to check the method. Reset restores the starting fields.

Use the result with context

Results are estimates for planning and education. Confirm rates, taxes, fees, and legal requirements with the relevant institution or a qualified professional before making a financial decision.

Formula and method

For an exposure of 100,000 and a 40% recovery rate, loss severity is 60% and the conditional loss amount is 60,000.

Loss severity = 1 − recovery rate; loss amount given default = exposure × loss severity

Worked example

Enter these known values and leave the other values blank.

Expected exposure
100000 USD
Recovery rate
40 %
Loss severity
60 %
Loss amount given default
60000 USD

Assumptions and limitations

  • No. This is the loss amount conditional on default. A probability-weighted expected loss also needs a default probability and may require timing, discounting, recovery costs and scenario assumptions. The result here is an amount; the severity field is a percentage.
  • Use consistent units, dates and financial definitions. The calculated result follows the stated assumptions and the amounts entered.

Common questions

Is this the probability-weighted expected credit loss?

No. This is the loss amount conditional on default. A probability-weighted expected loss also needs a default probability and may require timing, discounting, recovery costs and scenario assumptions. The result here is an amount; the severity field is a percentage.

References

The calculation equations, inverse formulas, units, and input rules were imported from this source. Bookify provides the interface and equation solver.

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