Sibbertsen, PhilippWeißbach, Rafael2004-12-062004-12-062004http://hdl.handle.net/2003/490410.17877/DE290R-15021When calculating the cost of entering into a credit transaction the predominant stochastic component is the expected loss. Often in the credit business the one-year probability of default of the liable counterpart is the only reliable parameter. We use this probability to calculating the exact expected loss of trades with multiple cash flows. Assuming a constant hazard rate for the default time of the liable counterpart we show that the methodology used in practice is a linear Taylor approximation of our exact calculus. In a second stage we can generalize the calculation to arbitrary hazard rates for which we prove statistical evidence and develop an estimate from historical data.enUniversitätsbibliothek Dortmund310report