Abstract: Fundamental to credit risk management and the calculation of regulatory capital under the IRB approach is the 'loss given default' (LGD), which represents the loss experienced if a borrower defaults. In principle, supervisors do not require any specific technique for LGD estimation (or for estimating other IRB parameters); however, organizations will have to demonstrate that the methods they choose are appropriate to the institution's activities and the portfolios to which they apply. The four main alternatives are 'workout LGD', 'market LGD', 'implied market LGD', and 'implied historical LGD'. The latter two techniques are considered to be implicit because they are not based directly on the realized LGD of defaulted facilities; moreover, the implied historical LGD technique is allowed only for the retail exposure class.KeywordsCollateral TypeRealization RateBasel CommitteeDefault LoanDefault DateThese keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.
Publication Year: 2012
Publication Date: 2012-01-01
Language: en
Type: book-chapter
Indexed In: ['crossref']
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