IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/20010.html
   My bibliography  Save this paper

Downturn LGD: A Spot Recovery Approach

Author

Listed:
  • Li, Hui

Abstract

Basel II suggests that banks estimate downturn loss given default (DLGD) in capital requirement calculation. There have been studies that focused on the dependence of default rates and loss given defaults through economic cycles. However, the models proposed are still not satisfactory. In this paper, we propose a new model framework based on our recent work of stochastic spot recovery for Gaussian copula. We also compare our model with the previous approaches.

Suggested Citation

  • Li, Hui, 2010. "Downturn LGD: A Spot Recovery Approach," MPRA Paper 20010, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:20010
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/20010/1/MPRA_paper_20010.pdf
    File Function: original version
    Download Restriction: no

    File URL: https://mpra.ub.uni-muenchen.de/20375/1/MPRA_paper_20375.pdf
    File Function: revised version
    Download Restriction: no

    References listed on IDEAS

    as
    1. Li, Hui, 2009. "Extension of Spot Recovery Model for Gaussian Copula," MPRA Paper 17944, University Library of Munich, Germany.
    2. Li, Hui, 2009. "On Models of Stochastic Recovery for Base Correlation," MPRA Paper 15750, University Library of Munich, Germany.
    3. Dirk Tasche, 2004. "The single risk factor approach to capital charges in case of correlated loss given default rates," Papers cond-mat/0402390, arXiv.org, revised Feb 2004.
    4. Düllmann, Klaus & Trapp, Monika, 2004. "Systematic Risk in Recovery Rates: An Empirical Analysis of US Corporate Credit Exposures," Discussion Paper Series 2: Banking and Financial Studies 2004,02, Deutsche Bundesbank.
    5. Li, Hui, 2009. "Double Impact on CVA for CDS: Wrong-Way Risk with Stochastic Recovery," MPRA Paper 19684, University Library of Munich, Germany.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. repec:eee:agiwat:v:193:y:2017:i:c:p:174-190 is not listed on IDEAS

    More about this item

    Keywords

    Basel II; Downturn Loss Given Default; Stochastic Recovery; Spot Recovery; Factor Credit Models; Default Time Copula; Gaussian Copula; Large Homogeneous Pool; Credit VaR; Expected Shortfall;

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:20010. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Joachim Winter). General contact details of provider: http://edirc.repec.org/data/vfmunde.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.