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In Rememberance: World Trade Center (WTC)

Collections Policy Comparison in LGD Modelling

by Lyn C. Thomas of the University of Southampton,
Anna Matuszyk of the University of Southampton, and
Angela Moore of the University of Southampton

September 3, 2009

Abstract: This paper discusses the similarities and the differences in the collection process between in house and 3rd Party collection. The objective is to show that although the same type of modelling approach to estimating Loss Given Default (LGD) can be used in both cases the details will be significantly different. In particular the form of the LGD distribution suggests one needs to split the distribution in different easy in the two cases as well as using different variables. The comparisons are made use two data sets of the collections outcomes from two sets of unsecured consumer defaulters.

Keywords: credit risk, collection process, LGD modelling.

Books Referenced in this Paper:  (what is this?)

Download paper (478K PDF) 14 pages

My normal policy for DefaultRisk.com is to 'post' corporate-obligor (not retail) credit risk research.  I've made an exception for this paper since it underscores a finding within the corporate universe that very different modeling approaches might be dictated by disparate: 1) recovery processes, or perhaps, 2) recovery rate proxies (30-day post prices vs. PV-ultimate cashflows.

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