Recovery rates
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…
Collateral damage
Credit risk
Ultimate recoveries
Measuring recovery using the ultimate rate observed at emergence from bankruptcy may be conceptually desirable, but modelling it is difficult.
A false sense of security
Credit portfolio models often assume that recovery rates are independent of default probabilities. Here, Jon Frye presents empirical evidence showing that such assumptions are wrong. Using US historical default data, he shows that not only are recovery…
Ultimate recoveries
Measuring recovery using the ultimate rate observed at emergence from bankruptcy may be conceptually desirable, but modelling it is difficult. Craig Friedman and Sven Sandow tackle the problem by maximising the creditor’s utility function, constructed…
A false sense of security
Credit portfolio models often assume that recovery rates are independent of defaultprobabilities. Here, Jon Frye presents empirical evidence showing that such assumptions arewrong. Using US historical default data, he shows that not only are recovery…
Unexpected recovery risk
For credit portfolio managers, the priority is to properly incorporate recovery rates into existing models. Here, Michael Pykhtin improves upon earlier approaches, allowing recovery rates to depend on the idiosyncratic part of a borrower’s asset return,…
A false sense of security
Recovery rates - Cutting edge
Ultimate recoveries
Recovery rates - Cutting edge
Unexpected recovery risk
For credit portfolio managers, the priority is to properly incorporate recovery rates into existing models. Here, Michael Pykhtin improves upon earlier approaches, allowing recovery rates to depend on the idiosyncratic part of a borrower’s asset return,…
Sponsor's article > No cure through the cycle
Some have argued that the antidote for pro-cyclicality in the Basel II capital requirements is the use of 'through-the-cycle' estimates of default and recovery rates. David Rowe argues that, whilethis might mitigate the pro-cyclical impact of the Accord,…
Long or short in CDOs
Masterclass with Deutsche Bank
Implications of Basel for credit risk
Credit risk comes under the spotlight in Pillar one of the new Accord, forcing institutions to consider the benefits – and costs – of meeting the regulatory requirements. Jared Chebib, head of credit risk consulting at Andersen’s London office reports.
Depressing recoveries
Credit risk
Making the grade
Credit derivatives