S&P looks at PD estimation in a Basel II environment
New S&P report states that there is a negative relationship between probability of default and speculative-grade post-default recovery values.
The estimation of the main parameters for the Basel II framework, such as probability of default (PD), has become one of the major focuses for risk management in the banking industry. PD estimation is a relatively well-developed area within the Basel II framework. PD estimation has been a popular topic of research for some time, although due to limited data the same attention has not been given to post-default recovery estimation - collecting this data is the most challenging aspect of any PD
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