Recovery Risk: The Next Challenge in Credit Risk Management

Introduction Edward I. Altman Andrea Resti, Andrea Sironi NYU Salomon Center and NYU Stern School of Business Bocconi University PART I: DEFINING AND MEASURING RECOVERY RISK 1 What Do We Know About Loss Given Default? Til Schuermann Federal Reserve Bank of New York and Wharton Financial Institutions Center 2 Defining LGD: The Basel II Perspective Andrea Resti, Andrea Sironi Bocconi University 3 Loss Given Default: A Review of the Literature Edward I. Altman Andrea Resti, Andrea Sironi NYU Salomon Center and NYU Stern School of Business Bocconi University 4 Estimating Recovery Risk by Means of a Quantitative Model: LossCalc Greg M. Gupton Moody's KMV 5 Recovery Ratings: A Fundamental Approach to Estimating Recovery Risk William H. Chew, Steven S. Kerr Standard and Poor's PART II: MEASURING LGD ON SPECIFIC PORTFOLIOS 6 How to Measure Recoveries and Provisions on Bank Lending: Methodology and Empirical Evidence Jean Dermine Cristina Neto de Carvalho INSEAD Universidade Catolica Portuguesa 7 Recovery Rates in the Banking Industry: Stylised Facts Emerging from the Italian Experience Pierpaolo Grippa, Simonetta Iannotti Fabrizio Leandri Bank of Italy Monte dei Paschi di Siena 8 Estimating LGD in the Leasing Industry: Empirical Evidence from a Multivariate Model Giacomo De Laurentis Marco Riani Bocconi University Universita degli Studi di Parma 9 Recovery Rates from Distressed Management Buy-Outs David Citron Mike Wright Cass Business School Nottingham University Business School PART III: THE PD/LGD CORRELATION 10 The Effects of Systematic Credit Risk: a False Sense of Security Jon Frye Federal Reserve Bank of Chicago 11 LGD in a Structural Model of Default Samu Peura Esa Jokivuolle Sampo plc Bank of Finland 12 The PD/LGD Link: Empirical Evidence from the Bond Market Edward I. Altman Brooks Brady Andrea Resti, Andrea Sironi NYU Salomon Center and NYU Stern School of Business Standard and Poor's Bocconi University 13 Systematic Risk in Recovery Rates of US Corporate Credit Exposures Klaus Dullmann Monika Trapp Duetsche Bundesbank University of Mannheim 14 The PD/LGD Link: Implications for Credit Risk Modelling Edward I. Altman Andrea Resti, Andrea Sironi NYU Salomon Center and NYU Stern School of Business Bocconi University 15 Credit Risk Assessment and Stochastic LGD: An Investigation of Correlation Effects Ali Chabaane Jean-Paul Laurent Julien Salomon ACA Consulting and BNP Paribas ISFAActuarial School, University of Lyon and BNP Paribas BNP Paribas PART IV: ADVANCED METHODOLOGIES 16 Choosing the Discount Factor for Estimating Economic LGD Iain Maclachlan Australia and New Zealand Banking Group Ltd 17 Estimating "Distressed" LGD on Defaulted Exposures: A Portfolio Model Applied to Leasing Contracts Marie-Paule Laurent, Mathias Schmit Universite Libre de Bruxelles, Solvay Business School 18 Estimation of Recovery Rate Densities: Non-parametric and Semi-parametric Approaches versus Industry Practice Matthias Hagmann Olivier Renault Olivier Scaillet HEC Lausanne and FAME CitiGroup Global Markets Ltd HEC Geneve and FAME 19 Estimating Conditional Probability Distributions of Recovery Rates: A Utility-Based Approach Craig Friedman Sven Sandow Standard and Poor's NYU Courant Institute of Mathematical Sciences