Bandyopadhyay, Arindam and Singh, Pratima (2007): Estimating Recovery Rates on Bank’s Historical Loan Loss Data.
Download (201kB) | Preview
The main objective of this paper is to estimate a statistical model that incorporates information at different levels: collateral, facility, industry, zone and the macro economy to predict the Recovery Rates which will enable the bank to arrive at the Loss Given Default figure that would help to better price and manage credit risk. This estimated LGD can also play a critical role in meeting the Basel II requirements on advanced Internal Rating Based Approach (AIRB).
|Item Type:||MPRA Paper|
|Original Title:||Estimating Recovery Rates on Bank’s Historical Loan Loss Data|
|Keywords:||Loss Estimation, Credit Risk, Modeling, Bank|
|Subjects:||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
G - Financial Economics > G2 - Financial Institutions and Services > G21 - Banks ; Depository Institutions ; Micro Finance Institutions ; Mortgages
|Depositing User:||Dr. Arindam Bandyopadhyay|
|Date Deposited:||12. Jul 2008 14:03|
|Last Modified:||11. Feb 2013 20:07|
Altman, E. I., and V. Kishore, 1996 (November-December), “Almost Everything You wanted to Know about Recoveries on Defaulted Bonds,” Financial Analysts Journal, pp. 57-64.
Altman, E. I., D. Crooke, and V. Kishore, 1999, “Defaults and Returns on High-Yield Bonds: Analysis through 1998 and Default Outlook for 1998-2001, “Working Paper, New York University Salomon Center, January.
Altman, E. I., et al, 2005, “The Link between Default and Recovery Rates:Theory, Empirical Evidence, and Implications”, Journal of Business, November.
Araten, M., M. Jacobs Jr, and P. Varshney, 2004, “Measuring LGD on Commercial Loans: An 18-Year Internal Study”, RMA Journal, May.
Bandyopadhyay, A., 2007, A note on Measurement and Management of Credit Risk under Basel II, NIBM, monograph,pp. 44-61.
____________, 2007, Poor default history, Business Standard, 27th December,pp. 10.
Basel II: International Convergence of Capital Measurement and CapitalStandards: a Revised Framework, Comprehensive Version (BCBS) (June 2006 Revision)
De Servigny, A., and O. Renault, 2004, Measuring and Managing Credit Risk,Standard & Poor’s, McGraw-Hill.
Izvorski, I., 1997, “Recovery Ratios and Survival Times for Corporate Bonds,”Working Paper, IMF.
Morrison, J. S., 2003 (May), “Preparing for Basel II Modeling Requirements. Part1: Model Development”, RMA Journal, pp. 56-61.
Schuermann, T., 2004, “What Do We Know About Loss Given Default?”,Working Paper, Wharton, Federal Reserve Bank of New York.
The Basel Handbook: A Guide for Financial Practitioners, 2nd Edition, Edited by Michael Ong, Riskbooks, 2007.
Yawitz, J. B., 1977, “An Analytical Model of Interest Rate Differentials and Different Default Recoveries,” Journal of Financial and Quantitative Analysis,Vol. 13, pp. 481-490.
Asarnow, Elliot, and David Edwards. "Measuring Loss on Defaulted Bank Loans:A 24-Year Study", Journal of Commercial Lending, (Mar-1995), Vol. 77, No.7, pp. 11-23.