Loss given default (LGD)
Empirical performance of loss given default prediction models
Research Papers
Comparability of EBA stress tests questioned
The ability of banks to use their own internal models for determining stressed PDs and LGDs mean the results will not be comparable, bankers claim
Risky funding with counterparty and liquidity charges
Risky funding with counterparty and liquidity charges
Name concentration correction
Credit Risk
Name concentration correction
Name concentration correction
Data not judgement required for Nordic banks' Basel approach
Nordic banks want to use the Basel framework’s advanced approach to credit risk capital, but local regulators are insistent that data – rather than judgement – has to be the basis for the calculations. Banks don’t have enough instances of default in…
Benefits of Basel II
Regulation
A multi-state Vasicek model for correlated default rate and loss severity
Correlation between default and recovery has an important bearing on credit risk capital. Here, Rahul Sen shows that the effect can be modelled efficiently by allowing multiple loss states in the Vasicek framework. Heavy-tailed distributions result for…
A multi-state Vasicek model for correlated default rate and loss severity
Correlation between default and recovery has a major bearing on credit risk capital. Rahul Sen shows the effect can be modelled efficiently by allowing multiple loss states in the Vasicek framework. Heavy-tailed distributions result for arbitrary loss…
A multi-state Vasicek model for correlated default rate and loss severity
Correlation between default and recovery has an important bearing on credit risk capital. Here, Rahul Sen shows that the effect can be modelled efficiently by allowing multiple loss states in the Vasicek framework. Heavy-tailed distributions result for…
Uncovering PD/LGD liaisons
Francisco Sanchez, Roland Ordovas, Elena Martinez and Manuel Vega consider the presence of correlation between default and recovery through the familiar variance of loss formula. Business cycle dependence permits a neat decomposition of the variance…
Going downturn
There is much debate regarding the definition of 'downturn' loss given default (LGD). In this article, Michael Barco offers an analytic approach for calculating downturn LGD so that credit risk capital is not underestimated or overestimated
Going downturn
There is much debate regarding the definition of 'downturn' loss given default (LGD). In this article, Michael Barco offers an analytic approach for calculating downturn LGD so that credit risk capital is not underestimated or overestimated
Modelling CDO tranches with dependent loss given default
Guido Giese presents an analytic methodology for pricing collateralised debt obligations tranches including stochastic and dependent loss given default
Modelling CDO tranches with dependent loss given default
Guido Giese presents an analytic methodology for pricing collateralised debt obligations tranches including stochastic and dependent loss given default
Default and recovery correlations - a dynamic econometric approach
Integrating coherences between defaults and loss given default (LGD) is postulated by Basel II. If there is a positive correlation between the two, separate models for each lead to biased estimates for the LGD parameters, and the economic loss is…
Default and recovery correlations - a dynamic econometric approach
Integrating coherences between defaults and loss given default (LGD) is postulated by Basel II. If there is a positive correlation between the two, separate models for each lead to biased estimates for the LGD parameters, and the economic loss is…
Default and recovery correlations - a dynamic econometric approach
Integrating coherences between defaults and loss given default (LGD) is postulated by Basel II. If there is a positive correlation between the two, separate models for each lead to biased estimates for the LGD parameters, and the economic loss is…
Modelling and estimating dependent loss given default
Martin Hillebrand proposes a portfolio credit risk model with dependent loss given default (LGD), offering a reasonable economic interpretation that is easily applicable to real data. He builds a precise mathematical framework, and stresses some…
A saddle for complex credit portfolio models
Guido Giese applies the saddle-point approximation to analyse tail losses for very general credit portfolios, including correlated defaults, stochastic recovery rates, and dependency between default probabilities and recovery rates. The numerical…