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Loss Given Default - Modelle zur Schätzung von Recovery Rates

Listed author(s):
  • Böttger, Marc
  • Guthoff, Anja
  • Heidorn, Thomas

Loss Given Default (LGD) is a major element for pricing credits and bonds. As there has been a substantial amount of research during the last years, this paper aims to give an overview. Initially, defaults and recovery definitions for credits and the differences to bonds are discussed. A survey of the empirical literature is given, finding average recovery rates for credits between 40% and 87% and lower rates for bonds. A survey of the literature on the influences on LGD showed 17 parameters. Based on these studies we suggest 6 parameters for LGD estimation. Finally an overview of LGD models is given including Standard & Poors and Moody´s KMV.

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Paper provided by Frankfurt School of Finance and Management in its series Frankfurt School - Working Paper Series with number 96.

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Date of creation: 2008
Handle: RePEc:zbw:fsfmwp:96
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