Recovery in Default Risk Modeling
Title | Recovery in Default Risk Modeling PDF eBook |
Author | Gurdip Bakshi |
Publisher | |
Pages | 54 |
Release | 2001 |
Genre | Default (Finance) |
ISBN |
Recovery and Default Risk
Title | Recovery and Default Risk PDF eBook |
Author | Stephen Lawrence Powell Phipps |
Publisher | |
Pages | 292 |
Release | 2001 |
Genre | |
ISBN |
Understanding the Role of Recovery in Default Risk Models
Title | Understanding the Role of Recovery in Default Risk Models PDF eBook |
Author | Gurdip Bakshi |
Publisher | |
Pages | 0 |
Release | 2001 |
Genre | |
ISBN |
Default Recovery Rates in Credit Risk Modeling
Title | Default Recovery Rates in Credit Risk Modeling PDF eBook |
Author | Edward I. Altman |
Publisher | |
Pages | 33 |
Release | 2008 |
Genre | |
ISBN |
Evidence from many countries in recent years suggests that collateral values and recovery rates on corporate defaults can be volatile and, moreover, that they tend to go down just when the number of defaults goes up in economic downturns. This link between recovery rates and default rates has traditionally been neglected by credit risk models, as most of them focused on default risk and adopted static loss assumptions, treating the recovery rate either as a constant parameter or as a stochastic variable independent from the probability of default. This traditional focus on default analysis has been partly reversed by the recent significant increase in the number of studies dedicated to the subject of recovery rate estimation and the relationship between default and recovery rates. This paper presents a detailed review of the way credit risk models, developed during the last thirty years, treat the recovery rate and, more specifically, its relationship with the probability of default of an obligor. Recent empirical evidence concerning this issue is also presented and discussed.
Recovery Risk in Credit Default Swap Premia
Title | Recovery Risk in Credit Default Swap Premia PDF eBook |
Author | Timo Schläfer |
Publisher | Springer Science & Business Media |
Pages | 124 |
Release | 2011-05-18 |
Genre | Business & Economics |
ISBN | 3834966665 |
Timo Schläfer exploits the fact that differently-ranking debt instruments of the same issuer face identical default risk but different default-conditional recovery rates. He shows that this allows isolating recovery risk without any of the rigid assumptions employed by priors and implements his approach using credit default swap data.
Understanding the Role of Recovery in Default Risk Models
Title | Understanding the Role of Recovery in Default Risk Models PDF eBook |
Author | Dilip B. Madan |
Publisher | |
Pages | 32 |
Release | 2006 |
Genre | |
ISBN |
This article presents a framework for studying the role of recovery on defaultable debt prices (for a wide class of processes describing recovery rates and default probability). These debt models have the ability to differentiate the impact of recovery rates and default probability, and can be utilized to invert the market expectation of recovery rates implicit in bond prices. Empirical implementation of these models suggests two central findings. First, the recovery concept that specifies recovery as a fraction of the discounted par value has broader empirical support. Second, parametric debt valuation models can provide a useful assessment of recovery rates embedded in bond prices. This article has attempted to model recovery and comprehend their impact on debt values.
Default and Recovery Risk Dependencies in a Simple Credit Risk Model
Title | Default and Recovery Risk Dependencies in a Simple Credit Risk Model PDF eBook |
Author | Benjamin Bade |
Publisher | |
Pages | 36 |
Release | 2013 |
Genre | |
ISBN |
This paper provides evidence for the relationship between credit quality, recovery rate, and correlation. The paper finds that rating grade, rating shift, and macroeconomic factors provide a highly significant explanation for default risk and recovery risk of US bond issues. The empirical data suggest that default and recovery processes are highly correlated. Therefore, a joint approach is required for estimating time-varying default probabilities and recovery rates that are conditional on default. This paper develops and applies such a model.