unexpected loss formula

I have found it helpful to remember this formula by just remembering “E before L”. Then just remember that you use the opposite of the EDF/LGD variance when combined with the coefficient…so AE * {EDF * Var(LGD) + LGD^2 * Var (EDF) }^0.5 Hope this helps…

hahaha, that’s exactly how i remember it also.

:slight_smile: