The probability of default of a derivative counterparty often increases as the bank's exposure at default with respect to that derivative position increases.

The loss given default for a derivative transaction is typically negatively correlated with the counterparty's probability of default.

Banks must make both through-the-cycle and point-in-time estimates of loss given default to comply with both regulatory requirements and accounting standards.

Current exposure is typically used to estimate exposure at default for a line of credit in order to provide a conservative estimate.