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Loss Given Default - Modelle zur Schätzung von Recovery Rates

Author

Listed:
  • Böttger, Marc
  • Guthoff, Anja
  • Heidorn, Thomas

Abstract

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.

Suggested Citation

  • Böttger, Marc & Guthoff, Anja & Heidorn, Thomas, 2008. "Loss Given Default - Modelle zur Schätzung von Recovery Rates," Frankfurt School - Working Paper Series 96, Frankfurt School of Finance and Management.
  • Handle: RePEc:zbw:fsfmwp:96
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    Cited by:

    1. Beyna, Ingo & Wystup, Uwe, 2010. "On the calibration of the Cheyette interest rate model," CPQF Working Paper Series 25, Frankfurt School of Finance and Management, Centre for Practical Quantitative Finance (CPQF).
    2. Wystup, Uwe, 2008. "Vanna-volga pricing," CPQF Working Paper Series 11, Frankfurt School of Finance and Management, Centre for Practical Quantitative Finance (CPQF).
    3. Herrmann-Pillath, Carsten, 2009. "Social capital, Chinese style: individualism, relational collectivism and the cultural embeddedness of the institutions-performance link," Frankfurt School - Working Paper Series 132, Frankfurt School of Finance and Management.
    4. Boeing, Philipp & Sandner, Philipp, 2011. "The innovative performance of China's national innovation system," Frankfurt School - Working Paper Series 158, Frankfurt School of Finance and Management.
    5. Herrmann-Pillath, Carsten, 2011. "Revisiting the Gaia hypothesis: Maximum Entropy, Kauffman's 'Fourth Law' and physiosemeiosis," Frankfurt School - Working Paper Series 160, Frankfurt School of Finance and Management.
    6. Roßbach, Peter & Karlow, Denis, 2011. "The stability of traditional measures of index tracking quality," Frankfurt School - Working Paper Series 164, Frankfurt School of Finance and Management.
    7. Heimer, Thomas & Arend, Sebastian, 2008. "The genesis of the Black-Scholes option pricing formula," Frankfurt School - Working Paper Series 98, Frankfurt School of Finance and Management.
    8. Heimer, Thomas & Hölscher, Luise & Werner, Matthias Ralf, 2008. "Access to finance and venture capital for industrial SMEs," Frankfurt School - Working Paper Series 97, Frankfurt School of Finance and Management.
    9. Böger, Andreas & Heidorn, Thomas & Rupprecht, Stephan, 2009. "Einführung in das Kapitalstrukturmanagement," Frankfurt School - Working Paper Series 121, Frankfurt School of Finance and Management.
    10. Yu, Xiaofan, 2011. "A spatial interpretation of the persistency of China's provincial inequality," Frankfurt School - Working Paper Series 171, Frankfurt School of Finance and Management.

    More about this item

    Keywords

    Loss given default; LGD; recovery; Ausfallschätzung;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage

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