Loss Given Default: Estimating by analyzing the distribution of credit assets and Validation
Mustapha Ammari and
Journal of Finance and Investment Analysis, 2016, vol. 5, issue 2, 1
The Basel II Accord offers banks the opportunity to estimate Loss Given Default (LGD) if they wish to calculate their own value for the capital required to cover credit losses in extreme circumstances. This paper will analyze the various methods of modeling LGD and will provide an alternative estimate of LGD using Merton's model for the valuation of assets. Four components will be developed in this document: estimation of the minimum value that could have a financial asset, estimation of the loss given default LGD, development of a practical component, and finally validation of the proposed model.
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Persistent link: https://EconPapers.repec.org/RePEc:spt:fininv:v:5:y:2016:i:2:f:5_2_1
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