# Fixed Income - Credit Stragies

In Blue Box Ex 1, from where do we get this formula for POD approximation?

The idea is that the spread exactly compensates you for the expected loss, so:

spread = E\left(loss\right) = POD \times LGD

It would have been nice if they’d mentioned that explicitly somewhere.

Thank you so much Sir…makes sense now…U r simply the best…

My pleasure.

You’re very kind.

If you look at the paragraph just below Exhibit 2 it is all mentioned there…