LGD @ default approach does not address the discount ate question – “implicit discounting”
Broad definition of default (“quasi-Basel” according to Moody’s) Exceptions: trade payables & other off-balance sheet obligations debt type, seniority ranking, debt above / below, collateral type Obligor / Capital Structure: industry, proportion bank / secured debt, number of creditor classes / number instruments Defaults: amounts (EAD, AI), default type, coupon, dates / durations Recovery / LGD measures: prices of pre-petition (or received in settlement) instruments at emergence or restructuring Sub-set: prices of traded debt at around default (30-45 day avg.)
Many OC’s had restructuring dates very near or after default trading dates
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