Estimating Recovery Rates on Bank’s Historical Loan Loss Data
The main objective of this paper is to estimate a statistical model that incorporates information at different levels: collateral, facility, industry, zone and the macro economy to predict the Recovery Rates which will enable the bank to arrive at the Loss Given Default figure that would help to better price and manage credit risk. This estimated LGD can also play a critical role in meeting the Basel II requirements on advanced Internal Rating Based Approach (AIRB).
|Date of creation:||Feb 2007|
|Date of revision:|
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- Yawitz, Jess B., 1977. "An Analytical Model of Interest Rate Differentials and Different Default Recoveries," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 12(03), pages 481-490, September.
- Ivailo Izvorski, 1997. "Recovery Ratios and Survival Times for Corporate Bonds," IMF Working Papers 97/84, International Monetary Fund.
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