Modeling Bank Loan LGD of Corporate and SME Segments: A Case Study

Radovan Chalupka and Juraj Kopecsni ()
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Juraj Kopecsni: Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic, http://ies.fsv.cuni.cz/

Czech Journal of Economics and Finance (Finance a uver), 2009, vol. 59, issue 4, 360-382

Abstract: Loss given default (LGD) is one of key parameters to estimate credit risk in an internal rating based approach considered in The New Basel Capital Accord. The aim of this paper is to find determinants of LGD using a set of firm loan micro-data of an anonymous Czech commercial bank. The authors find that LGD is driven primarily by the period of loan origination, relative value of collateral, loan size and length of business relationship. Different models employed in their analysis provide similar results; in more complex models, log-log models appear to perform better, implying an asymmetric response of the dependent variable.

Keywords: credit risk; loss given default; fractional responses; ordinal regression; quasi-maximum likelihood estimator (search for similar items in EconPapers)
JEL-codes: G21 G28 (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (11)

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Related works:
Working Paper: Modelling Bank Loan LGD of Corporate and SME Segments: A Case Study (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:fau:fauart:v:59:y:2009:i:4:p:360-382

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