Expected loss and the breakeven spread calculator
Default probability times the loss when it happens.
Interactive: expected loss and the breakeven spreadMedium
- Loss given default
- —
- Expected loss
- —
- Expected loss in bp
- —
- Loss if it actually defaults
- —
- Breakeven spread
- —
- Reading
- —
Senior unsecured recoveries have historically clustered near 40% and secured loans far higher — but recoveries fall exactly when defaults rise, because the assets are being sold into the same downturn. The breakeven spread here is the floor before any compensation for that correlation, for illiquidity, or for being wrong.
The idea behind it
This calculator belongs to Credit Derivatives, where the mechanism it computes is explained step by step, with the formula, what each input means and where the simple model stops being right. Everything is computed in your browser; nothing you type is sent anywhere.
More calculators from Credit Derivatives
- Spread ⇄ default probability — the credit triangle.
- Spread-duration P&L — the credit trader's mental arithmetic.
- Tranche loss calculator — where a portfolio loss lands in the stack.
- CDS–bond basis — the classic relative-value gap.
- Altman Z-score — the 1968 distress screen, still in use.
- Downgrade risk, not just default risk — most credit loss is the first, not the second.
- Distance to a contingent-convertible trigger — the headroom, and why the trigger is rarely what fires.