Modelling and estimating dependent loss given default

Most credit risk models assume loss given default (LGD) is a constant proportion of any credit loss, and ignore the fact that LGD is itself an important driver of portfolio credit risk because of its possible dependence on economic cycles. The Basel Committee on Banking Supervision (2004) acknowledged this importance by starting a discussion with the banking industry aimed at investigating this issue.

Empirical evidence for dependent LGD is provided by data presented in Altman et al (2003) and

Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.

To access these options, along with all other subscription benefits, please contact [email protected] or view our subscription options here: http://subscriptions.risk.net/subscribe

You are currently unable to copy this content. Please contact [email protected] to find out more.

To continue reading...

You need to sign in to use this feature. If you don’t have a Risk.net account, please register for a trial.

Sign in
You are currently on corporate access.

To use this feature you will need an individual account. If you have one already please sign in.

Sign in.

Alternatively you can request an individual account here: