Jobst, Rainer and Kellner, Ralf and Roesch, Daniel (2020) Bayesian loss given default estimation for European sovereign bonds. INTERNATIONAL JOURNAL OF FORECASTING, 36 (3). pp. 1073-1091. ISSN 0169-2070, 1872-8200
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We develop and apply a Bayesian model for the loss rates given defaults (LGDs) of European Sovereigns. Financial institutions are in need of LGD forecasts under Pillar II of the regulatory Basel Accord and the downturn in LGD forecasts under Pillar I. Both are challenging for portfolios with a small number of observations such as sovereigns. Our approach comprises parameter risk and generates LGD forecasts under both regular and downturn conditions. With sovereign-specific rating information, we found that average LGD estimates vary between 0.46 and 0.64, while downturn estimates lay between 0.50 and 0.86. (C) 2020 International Institute of Forecasters. Published by Elsevier B.V. All rights reserved.
| Item Type: | Article |
|---|---|
| Uncontrolled Keywords: | LOAN RECOVERY RATES; CREDIT RISK; BANK LOANS; REGRESSION; BETA; Loss given default; Sovereign bonds; Bayesian estimation; Probability of default; Credit risk |
| Subjects: | 600 Technology > 650 Management & auxiliary services |
| Divisions: | Business, Economics and Information Systems > Institut für Betriebswirtschaftslehre > Lehrstuhl für Statistik und Risikomanagement (Prof. Dr. Rösch) |
| Depositing User: | Dr. Gernot Deinzer |
| Date Deposited: | 19 Mar 2021 12:47 |
| Last Modified: | 19 Mar 2021 12:47 |
| URI: | https://pred.uni-regensburg.de/id/eprint/44329 |
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