Downturn LGD: A Spot Recovery Approach

Hui Li

MPRA Paper from University Library of Munich, Germany

Abstract: Basel II suggests that banks estimate downturn loss given default (DLGD) in capital requirement calculation. There have been studies that focused on the dependence of default rates and loss given defaults through economic cycles. However, the models proposed are still not satisfactory. In this paper, we propose a new model framework based on our recent work of stochastic spot recovery for Gaussian copula. We also compare our model with the previous approaches.

Keywords: Basel II; Downturn Loss Given Default; Stochastic Recovery; Spot Recovery; Factor Credit Models; Default Time Copula; Gaussian Copula; Large Homogeneous Pool; Credit VaR; Expected Shortfall (search for similar items in EconPapers)
JEL-codes: G13 G32 (search for similar items in EconPapers)
Date: 2010-01-13
New Economics Papers: this item is included in nep-ban and nep-rmg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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https://mpra.ub.uni-muenchen.de/20375/1/MPRA_paper_20375.pdf revised version (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:20010

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