Hi All,
This is in regards to Credit Default Swaps. Can some one explain what exactly Loss Given Default means?
It’s simply the amount of loss that you will incur if the counterparty defaults.
For example, if you own a $1,000 par bond that pays 6% annually and the company defaults on the payment at maturity, your loss given default will be $1,060.
think ‘loss, given default’
Its introduced in the last reading in FI as well. Could help to glance over that section if you’re looking for an alternative explanation.