The stage one to stage two step calculator

The stage one to stage two step, worked through in your browser.

Interactive: the stage one to stage two stepHard

The allowance on a performing loan covers losses expected in the next twelve months. The moment credit risk has increased significantly it covers losses expected over the whole remaining life — without anybody missing a payment.

Exposure at default (m) 12-month probability of default % Lifetime probability of default % Loss given default %

Stage one allowance: —
Stage two allowance: —
The step, in money: —
The step, as a multiple: —
Cover as a share of exposure: —
Reading: —

Expected loss as probability times loss given default times exposure, undiscounted — the shape of the calculation rather than a firm's model, which discounts, segments and applies several forward-looking scenarios. Information and education only.

The idea behind it

This calculator belongs to How a Position Hits the Books, 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.

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The same in full — six points, and why each one matters

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Nothing here is tailored to you. This is written for a general audience. It does not consider your objectives, financial situation, knowledge, time horizon or tolerance for loss.
The examples are simplified. Worked examples use round numbers and leave out costs, spreads, taxes, collateral, settlement and market conventions that materially change real outcomes.
The models are teaching models. Formulas shown are standard textbook formulations. Institutions add calibration, live market data and credit, funding and capital adjustments — nothing here will reproduce a dealer’s quote or produce a valuation you can rely on.
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