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…

Spread = LGD x POD

POD = Spread/LGD

Voilà!