Systematic Risk in Recovery Rates - An Empirical Analysis of US Corporate Credit Exposures

Topics:
Commercial Banking
Tags:
Analysis,
Deutsche Bundesbank,
Management,
Recovery Rate,
Risk,
Security,
Strategy
Source:
Deutsche Bundesbank

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Overview: This paper presents an analytical and empirical analysis of a parsimonious model framework that accounts for a dependence of bond and bank loan recoveries on systematic risk. The report extends the single risk factor model by assuming that the recovery rates also depend on this risk factor and follow a logit-normal distribution. The results are compared with those of two related models, suggested in Frye (2000) and Pykhtin (2003), which pose the assumption of a normal and a log-normal distribution of recovery rates.

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Format: PDF | Size: 480KB | Date: Aug 2004 | Pages: 52

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