The measurement of LGD - the share of an exposure that is actually lost when a borrower defaults - is a critical area of the science of credit analysis. Topics covered include:
Using multivariate models for the estimation of LGD
Exploring the links between LGD and default risk
Providing a Basel II compliant framework for LGD estimation
Helping you to transform research results into operational tools for setting up Basel II compliant rating systems
Full accounts of the latest developments in the field of LGD analysis
Includes a full summary of results of academic research in LGD measurement over the past 10 years, including the latest research findings from the main empirical and theoretical academics.
Introduction
Edward I. Altman; Andrea Resti, Andrea Sironi
NYU Salomon Center and NYU Stern School of Business;
Bocconi University
PART I: DEFINING AND MEASURING RECOVERY RISK
1 What Do We Know About Loss Given Default?
Til Schuermann
Federal Reserve Bank of New York and Wharton Financial
Institutions Center
2 Defining LGD: The Basel II Perspective
Andrea Resti, Andrea Sironi
Bocconi University
3 Loss Given Default: A Review of the Literature
Edward I. Altman; Andrea Resti, Andrea Sironi
NYU Salomon Center and NYU Stern School of Business;
Bocconi University
4 Estimating Recovery Risk by Means of a Quantitative Model: LossCalc
Greg M. Gupton
Moodys KMV
5 Recovery Ratings: A Fundamental Approach to Estimating Recovery Risk
William H. Chew, Steven S. Kerr
Standard and Poors
PART II: MEASURING LGD ON SPECIFIC PORTFOLIOS
6 How to Measure Recoveries and Provisions on Bank Lending: Methodology and Empirical Evidence
Jean Dermine; Cristina Neto de Carvalho
INSEAD; Universidade Catolica Portuguesa
7 Recovery Rates in the Banking Industry: Stylised Facts Emerging from the Italian Experience
Pierpaolo Grippa, Simonetta Iannotti; Fabrizio Leandri
Bank of Italy; Monte dei Paschi di Siena
8 Estimating LGD in the Leasing Industry: Empirical Evidence from a Multivariate Model
Giacomo De Laurentis; Marco Riani
Bocconi University; Università degli Studi di Parma
9 Recovery Rates from Distressed Management Buy-Outs
David Citron; Mike Wright
Cass Business School; Nottingham University
Business School
PART III: THE PD/LGD CORRELATION
10 The Effects of Systematic Credit Risk: a False Sense of Security
Jon Frye
Federal Reserve Bank of Chicago
11 LGD in a Structural Model of Default
Samu Peura; Esa Jokivuolle
Sampo plc; Bank of Finland
12 The PD/LGD Link: Empirical Evidence from the Bond Market
Edward I. Altman; Brooks Brady; Andrea Resti, Andrea Sironi
NYU Salomon Center and NYU Stern School
of Business; Standard and Poors; Bocconi University
13 Systematic Risk in Recovery Rates of US Corporate Credit Exposures
Klaus Düllmann; Monika Trapp
Duetsche Bundesbank; University of Mannheim
14 The PD/LGD Link: Implications for Credit Risk Modelling
Edward I. Altman; Andrea Resti, Andrea Sironi
NYU Salomon Center and NYU Stern School of Business;
Bocconi University
15 Credit Risk Assessment and Stochastic LGD: An Investigation of Correlation Effects
Ali Chabaane; Jean-Paul Laurent; Julien Salomon
ACA Consulting and BNP Paribas; ISFAActuarial School,
University of Lyon and BNP Paribas; BNP Paribas
PART IV: ADVANCED METHODOLOGIES
16 Choosing the Discount Factor for Estimating Economic LGD
Iain Maclachlan
Australia and New Zealand Banking Group Ltd
17 Estimating 'Distressed' LGD on Defaulted Exposures: A Portfolio Model Applied to Leasing Contracts
Marie-Paule Laurent, Mathias Schmit
Université Libre de Bruxelles, Solvay Business School
18 Estimation of Recovery Rate Densities: Non-parametric and Semi-parametric Approaches versus Industry Practice
Matthias Hagmann; Olivier Renault; Olivier Scaillet
HEC Lausanne and FAME; CitiGroup Global Markets
Ltd; HEC Genève and FAME
19 Estimating Conditional Probability Distributions of Recovery Rates: A Utility-Based Approach
Craig Friedman; Sven Sandow
Standard and Poors; NYU Courant Institute of
Mathematical Sciences
