Calculate the LGD Value

The LGD value that is used in the Specific Provision method is obtained from the interpolated LGD term structure. The input LGD term structures are processed to calculate the LGD values at the bucket frequency. This processing is applied for accounts under the Specific Provision methodology as well. After the LGD term structures are processed, each account is associated with an LGD value against the current period. As mentioned in the section on LGD processing, the current period value corresponds to the 0th period or the 0th bucket.

This value, corresponding to the zeroth period or bucket, is assigned as the LGD value that is used in the Specific Provision method.

The 12 Month PD, Lifetime PD, and LGD values are stored for reporting.