Question

Define the risk of ‘layering’ and how does it affect Loss-given default (LGD)?​

Answer 1

Explanation:

What Is Loss Given Default (LGD)?

Loss given default (LGD) is the amount of money a bank or other financial institution loses when a borrower defaults on a loan, depicted as a percentage of total exposure at the time of default. A financial institution’s total LGD is calculated after a review of all outstanding loans using cumulative losses and exposure.