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Loss Given Default: Estimating by analyzing the distribution of credit assets and Validation

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  • Mustapha Ammari
  • Ghizlane Lakhnati

Abstract

The Basel II Accord offers banks the opportunity to estimate Loss Given Default (LGD) if they wish to calculate their own value for the capital required to cover credit losses in extreme circumstances. This paper will analyze the various methods of modeling LGD and will provide an alternative estimate of LGD using Merton's model for the valuation of assets. Four components will be developed in this document: estimation of the minimum value that could have a financial asset, estimation of the loss given default LGD, development of a practical component, and finally validation of the proposed model.

Suggested Citation

  • Mustapha Ammari & Ghizlane Lakhnati, 2016. "Loss Given Default: Estimating by analyzing the distribution of credit assets and Validation," Journal of Finance and Investment Analysis, SCIENPRESS Ltd, vol. 5(2), pages 1-1.
    • Handle: RePEc:spt:fininv:v:5:y:2016:i:2:f:5_2_1
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    Cited by:

    1. Mustapha Ammari & Ghizlane Lakhnati, 2017. "Loss Given Default Estimating by the Conditional Minimum Value," International Journal of Economics and Financial Issues, Econjournals, vol. 7(3), pages 779-785.

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