Bank Loan Loss Given Default
by Greg M. Gupton of Moody's Investors Service,
Introduction: This study updates Moody's previous Loss Given Default (LGD) research for bank loans by more than doubling the number of observations from the 58 in our November 1996 study to 121 defaults (representing 181 loans). Here, we look to secondary market price quotes of bank loans one month after the time of default - allowing markets to process the default news and revalue the debt. This additional data allows not only a refinement of recovery rate estimates, but also an examination of the factors driving LGD.
JEL Classification: C33, G20, G33.
Download paper (179K PDF) 24 pages
Related reading: LossCalc v2: Dynamic Prediction of LGD
This paper was republished by Algorithmics, here . This is actually a cleaner version since I had the opportunity to fix the errata. This reprint (of the Moody's research piece) is via Algorithmics research branch.