Assessment of loan losses after default

Pomazanov Mikhail

Papers from arXiv.org

Abstract: The paper shows how to determine the loss on an LGD borrower's loan after default, with or without preparation of a separate model. The solution evaluates LGD after default, considering the average maturity of the defaulted loan, knowledge of volumes, moments of default and repayments, the rate or other parameters in the vector of determinants. The decision was based on the average recovery period for defaulted loans, which is calculated in the article. The model of general recovery for the recovery process for the required LGD segment was used. Only this type of model allows you to set LGD no more than one, which is required for calculating further estimates.

Date: 2025-11, Revised 2026-04
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