Modeling of EAD and LGD: Empirical Approaches and Technical Implementation

Yang, Bill Huajian and Tkachenko, Mykola (2012): Modeling of EAD and LGD: Empirical Approaches and Technical Implementation. Published in: Journal of Credit Risk , Vol. 8, No. 2 (18 June 2012)

Abstract

The Basel Accords have created the need to develop and implement models for PD, LGD and EAD. Although PD is quite well researched, LGD and EAD still lag both in theoretical and practical aspects. This paper proposes some empirical approaches for EAD/LGD modelling and provides technical insights into their implementation. It is expected that modellers will be able to use the tools proposed in this paper.

• Item Type: MPRA Paper
• Language: English
• Keywords: Basel, EAD, LGD, WOE, Naïve Bayes, mixture density, neural network
• Subjects: C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods and Methodology: General; C - Mathematical and Quantitative Methods > C5 - Econometric Modeling; G - Financial Economics > G3 - Corporate Finance and Governance > G32 - Financing Policy ; Financial Risk and Risk Management ; Capital and Ownership Structure ; Value of Firms ; Goodwill

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