The Industry Portal
Risk

Exposure at Default (EAD)

The amount a lender is exposed to at the moment a borrower defaults, including undrawn commitments likely to be drawn.

Exposure at Default estimates how large the exposure will be if and when a default occurs. For a loan it is the balance outstanding, but for a facility with undrawn limits it includes the portion likely to be drawn before default.

It is the third of the three credit risk parameters and, with PD and LGD, determines expected loss and capital.

Related terms

Watch this explained

All videos

Learn this properly

A weekly note across Finance & Treasury, Innovation & Automation and Career Development. No spam, unsubscribe any time.